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Exhibit Index p.29
Exhibits begin p. (n/a)
Total pages: 48
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 1996
Commission file number 000-16757
CONCORD MILESTONE PLUS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1494615
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
5200 TOWN CENTER CIRCLE, 4TH FLOOR
BOCA RATON, FLORIDA 33486
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (561) 394-9260
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Class A Interests ("Class A Interests"), each such interest representing an
assignment of one Class A Limited Partnership Interest held by CMP Beneficial
Corp., a Delaware corporation (the "Assignor"), under the Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement") of Concord
Milestone Plus, L.P.
(Title of Class)
Class B Interests ("Class B Interests"), each such interest representing an
assignment of one Class B Limited Partnership Interest held by the Assignor
under the Partnership Agreement.
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
The Class A and Class B Interests are not traded on any established public
trading market.
DOCUMENTS INCORPORATED BY REFERENCE NONE
<PAGE>
PART I
Item 1. Business.
(a) General Development of Business.
Concord Milestone Plus, L.P. (the "Partnership") was organized
as a Delaware limited partnership on December 12, 1986 with CM Plus Corporation,
a Delaware corporation (the "General Partner"), as its general partner. The
General Partner is wholly owned by Concord Assets Group, Inc. ("Concord"). The
Partnership is engaged in the business of owning and operating three shopping
centers. CMP Beneficial Corp. is a wholly owned subsidiary of Concord which was
organized under Delaware law in December 1986 for the sole purpose of holding
limited partnership interests in the Partnership for the benefit of holders of
the Class A Interests and Class B Interests and has engaged in no business
activities other than fulfilling its obligations under the Amended and Restated
Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement").
(b) Industry Segment Information.
The Partnership has only one industry segment, commercial real
estate. See Item 8, "Financial Statements and Supplementary Data", of this
report for a summary of the Partnership's operations for its last three fiscal
years.
(c) Narrative Description of Business.
The Partnership was formed for the purpose of investing in
existing income-producing commercial and industrial real estate, such as
shopping centers, office buildings, free-standing commercial buildings,
warehouses and distribution centers. The Partnership currently owns and operates
three shopping centers, one located in Searcy, Arkansas (the "Searcy Property"),
one located in Valencia, California (the "Valencia Property") and one located in
Green Valley, Arizona (the "Green Valley Property").
The amount of revenues attributable to the Searcy Property, the
Valencia Property and the Green Valley Property (collectively, the "Properties")
from tenants not affiliated with the Partnership was (i) $409,186, $1,354,547
and $1,196,679, respectively, for the fiscal year ended December 31, 1996; (ii)
$441,239, $1,388,592 and $1,204,137, respectively, for the fiscal year ended
December 31, 1995; and (iii) $419,757, $1,427,475 and $1,291,654, respectively,
for the fiscal year ended December 31, 1994.
See Item 2, "Properties", of this Report for additional
information as to the Properties, including a description of the competitive
conditions affecting them.
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Employees
The Partnership employs six people at the Green Valley Property and one
person at the Searcy Property who provide general maintenance and security
services. Milestone Property Management, Inc., an affiliate of the General
Partner, provides all management services for the Partnership and is reimbursed
annually for its cost of administrative services provided to the Partnership,
including the pro rata cost of personnel. Aside from its officers, the General
Partner has no employees. See Item 11, "Compensation", of this Report.
Item 2. Properties.
The Properties consist of three shopping centers: the Searcy Property, the
Valencia Property and the Green Valley Property. For the purposes of this
section, the following is a glossary of terms:
a. Occupancy rate - the rate of the actual leased area (square
footage) to gross leasable area (square footage) as of the
end of the fiscal year (December 31).
b. Leasable area - The area (square footage) for which rent can
be charged.
c. Average effective annual rental per square foot - The
average rental rate received per square foot of leased space
taking rental concessions and discounts into consideration.
Bond Mortgages
Each of the Properties is subject to a note together with a
related first mortgage or deed of trust on that Property in principal amount up
to 65% of the Partnership's purchase price of that Property (a "Bond Mortgage"),
which was granted by the Partnership to United States Company of New York, as
trustee (the "Trustee") (or, in the case of a deed of trust, to a deed of
trustee for the benefit of the Trustee) for the benefit of the holders of the
Partnership's Escalating Rate Collateralized Mortgage Bonds due November 30,
1997 (the "Bonds") (see item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for further discussion). The
aggregate principal amount of Bonds outstanding as of March 15, 1997 was
$16,452,000 and the Bonds are cross collateralized by all three properties. As
of that date, the principal amount of the Bond Mortgages, on the Searcy
Property, the Valencia Property and the Green Valley Property were $2,632,500,
$7,523,500 and $6,296,000, respectively.
The Bonds bear interest, payable semi-annually, from the date of
issuance at annual rates increasing from 8.15 percent to 10 percent (10 percent,
9.50 percent and 9.25 percent at December 31, 1996, 1995 and 1994, respectively)
and mature on November 30, 1997. The Bonds have an effective interest rate of
9.66 percent. Pursuant to the Indenture pursuant to which the Bonds were issued,
the Bonds are subject to early redemption (at 101 percent of the principal
amount through May 31, 1997, and thereafter without any premium) under certain
circumstances. The holders of
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the Bonds have a first lien on the Properties through the Bond Mortgages. The
bond discount is amortized using the effective interest method.
The Searcy Property
Searcy, Arkansas
Location. The Searcy Property is situated on an irregularly
shaped parcel of approximately 10.78 acres, which has frontages on Race Avenue
and Front Street in the City of Searcy, Arkansas. Searcy, the county seat of
White County, is located in the central portion of the State of Arkansas,
approximately 50 miles northeast of Little Rock, Arkansas.
The Searcy Property is part of a larger shopping complex known
as the Town and Country Plaza. In addition to the Searcy Property, the Town and
Country Plaza consists of an approximately seven acre parcel (formerly the site
of a free-standing Wal-Mart department store) and five adjacent out parcels
totaling 3.86 acres.
The Searcy Property is situated on the west side of Front
Street, just west of U.S. Route 64, 67 and 167, and the south side of State
Route 36 (Race Avenue). The Searcy Property is part of a two-mile stretch of
commercial development along Race Avenue that is the main shopping area for the
city, county and surrounding areas. Searcy's marketing area includes all of
White County and portions of surrounding counties. Town and Country Plaza
comprises the major portion of this main shopping area. Race Avenue is improved
with strip shopping centers, car dealerships, fast food franchises, motels,
restaurants, gas stations, banks, a hospital, a vocational-technical school and
free-standing commercial businesses.
Competition. There are three shopping centers within two miles
to the west of the Town and Country Plaza on Race Avenue. One shopping center
consists of an Alco discount department store and a Piggly Wiggly food store.
The second shopping center consists of a Fred's discount store, Warehouse Foods,
Sears catalog store and two satellite stores. The third center consists of a
Kroger food store and a Revco drugstore. Directly across the street from the
Searcy Property is a Wal-Mart superstore. The Wal-Mart relocated from the Town
and Country Plaza in 1992.
Description. The Searcy Property, which was completed in July
1985, is a one-story masonry and steel building whose exterior is painted
concrete block with masonry, brick and glass fronts. The Searcy Property
contains 78,436 gross leasable square feet containing 9 units. The entire Town
and Country Plaza has parking for 970 cars of which approximately 570 parking
spaces are allocated to the Searcy Property.
Operating and Tenant Information. As of March 15, 1997, there
were 9 tenants (including two anchor tenants) and no vacancies at the Searcy
Property. The occupancy rate was 92.9%, 95.5%, 100%, 90.9% and 100% for 1996,
1995, 1994, 1993 and 1992, respectively. The average effective annual rental per
square foot was $5.03, $5.15, $5.46, $6.05, and $5.82 for 1996, 1995, 1994, 1993
and 1992, respectively.
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The two anchor tenants, a J.C. Penney department store and a
Stage Store ("Stage"), occupy 10% or more of the gross leasable area of the
Searcy Property. J.C. Penney, a clothing and apparel department store, occupies
39,396 square feet or 50.2% of the gross leasable area of the Searcy Property.
Stage, a clothing and apparel store, occupies 15,600 square feet or 19.9% of the
gross leasable area of the Searcy Property. The principal provisions of the
leases with these anchor tenants are summarized below.
J.C. Penney operates its department store under a lease that
commenced October 2, 1985, as amended on November 5, 1996, and expires December
31, 2007, subject to eight five-year renewal options exercisable by J.C. Penney.
On November 5, 1996, the lease was amended, to allow for J.C. Penney's
expansion. Effective January 1, 1997, pursuant to the amendment, the December
31, 2007 expiration date will be changed to be 10 years from the time the
expanded store is open for business. The expansion includes 12,902 square feet
of additional land, which includes 5,600 square feet of pad space previously
occupied by smaller tenants. In 1997, J.C. Penney plans to build on the 7,302
square feet of unoccupied land. The additional base rent due to the expansion is
$40,000 and, beginning January 1, 1997, the annual minimum rent is $205,600
($5.21 per square foot). The lease provides for annual percentage rent equal to
1.5% of the tenant's gross receipts in excess of $11,820,004. The total rent
received from J.C. Penney in 1996 was $165,600. In addition, J.C. Penney is
required to reimburse the Partnership (as an offset against percentage rent) a
pro rata share of any increases in real estate taxes over the highest tax paid
by the Partnership during any of the first three years of operation. J.C. Penney
is also required to reimburse the Partnership for common area maintenance
expenses in annual amounts per square foot of tenant space as follows: $0.20 for
years 1-5, $0.25 for years 6-10, $0.30 for years 11-15, $0.35 for years 16-20
and $0.50 during the option periods. J.C. Penney is required to maintain
comprehensive public liability insurance of not less than $1,000,000 per
occurrence of bodily injury or death and not less than $100,000 per occurrence
for property damage.
J.C. Penney has the right to discontinue use of the premises as
a J.C. Penney retail store business, or sublet or assign the premises, at any
time. This right is subject to certain notice requirements and the Partnership's
option to cancel the lease. As long as the lease remains in effect after 30 days
of discontinued use, J.C. Penney must pay, in addition to the annual minimum
rent, additional rent equal to the average of the amounts paid as percentage
rent for each lease year during the period between the commencement of the lease
and the time when it discontinues use of the premises.
Stage operates its store under a lease that expires July 30,
2001, subject to three five-year renewal options exercisable by Stage. The
annual minimum rent is $81,900 ($5.25 per square foot). In addition, the lease
provides for percentage rent equal to 3% of gross annual sales in excess of
$2,600,000. The total rent received from Stage in 1996 was $81,900. Stage is
required to reimburse the Partnership a pro rata share of real estate taxes and
insurance costs subject to a maximum of $6,240 for real estate taxes and $1,248
for insurance costs in any lease year. Stage is also required to reimburse the
Partnership to a maximum of $3,120 for a share of the expenses of maintaining
the common areas.
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The other seven tenants at the Searcy Property provide a variety
of goods and services, including furniture, family shoes, ladies apparel and
jewelry. These leases have varying original lease terms ranging from 1 to 14
years and provide for annual minimum rents aggregating $126,153 and ranging from
$6.00 per square foot to $9.00 per square foot (a weighted average of $7.22 per
square foot). Most of the leases contain provisions for additional rent
calculated as a specified percentage of the tenant's gross receipts above fixed
minimum amounts and for reimbursement of all or a portion of the tenant's pro
rata share of real estate taxes, insurance and common area maintenance expenses.
Three tenants leasing an aggregate of 6,320 square feet are on month to month
rental agreements.
The following table shows selected lease expiration information
for the Searcy Property (assuming no renewals or cancellations):
% of Total
Gross 1997 1997
Year of Number of Leasable Annual Annual
Expiration Leases Area Minimum Minimum
of Lease Expiring (Sq.Ft.) Rent Rent
------------ ------------- --------- ------------- --------
1997 3 6,320 37,920 9.2%
1998 1 2,867 24,513 5.9%
1999 1 3,600 21,600 5.2%
2000 1 5,973 (1) ---
2001 2 20,280 124,020 30.0%
2007 1 39,396 205,600 49.7%
---- - ------ ------- ------
Total 9 78,436 413,653 100.0%
= ====== ======= ======
(1) This tenant currently pays 4% of gross sales in lieu of all
rental obligations
Real estate taxes on the Searcy Property are based on a tax rate
of 3.41% of assessed valuation. The current assessed valuation of the Searcy
Property is approximately $754,000 and real estate taxes for 1996 are
approximately $26,000. Real estate taxes are subject to increases in the future
that may result from reassessment and/or increases in the tax rate.
The Partnership's adjusted federal income tax basis for the
Searcy Property is approximately $3,311,000 of which $430,000 is allocated to
land and $2,881,000 to the building and improvements. For financial statement
purposes, the Partnership depreciates the cost of the building over 31.5 years
and improvements over 5 to 12 years using the straight-line method of cost
recovery. In the opinion of the General Partner, the Searcy Property is
adequately insured.
Old Orchard Shopping Center
Valencia, California
Location. The Valencia Property, named the Old Orchard Shopping
Center, is situated on an approximately 9.94-acre parcel that has frontages on
Lyons Avenue and Orchard Village Road
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in the town of Valencia, California. Valencia is located in the Santa Clarita
Valley in Los Angeles County, approximately 35 miles north of Los Angeles. Old
Orchard Shopping Center is located on the northwest corner of Lyons Avenue and
Orchard Village Road in a heavily developed commercial area. Lyons Avenue is
improved with shopping centers, fast food restaurants, housing developments and
free standing convenience stores. The surrounding area is densely populated with
apartments, condominiums and single family residences.
Competition. Within two miles of the Valencia Property there are
competing shopping facilities at Newhall Plaza with a Von's Food Store and 10
satellite stores, Granary Square with a Hughes Food Market, Long's Drugstore and
26 satellite stores, a Safeway Supermarket complimented by 14 satellite stores
and the Alpha Beta Center with Alpha Beta Food stores and 16 satellite stores.
In 1992, a strip center anchored by a Ralph's Foods opened within a mile of the
Valencia Property.
In 1996, a 78,000 square foot shopping center opened on Old
Orchard Street across from the Valencia Property. This center includes a 46,000
square foot Ralph's Supermarket, a 16,000 square foot drugstore and 16,000
square feet of smaller stores. This shopping center has had an adverse impact on
tenant sales but it has not materially adversely affected the occupancy rate at
the Valencia Property.
Description of the Property. Old Orchard Shopping center is an
eight building, one-story masonry and steel shopping center complex that was
originally constructed in 1965. During 1985 and 1986 the shopping center was
renovated and enlarged to 103,413 square feet of gross leasable area. The
exterior construction is pre-cast concrete, fluted block and decorative tile.
The shopping center has over 500 parking spaces.
Operating and Tenant Information. As of March 15, 1997 there
were 20 tenants (including two anchor tenants) and two vacancies at the Valencia
Property. The occupancy rate was 97.1%, 100%, 93.5%, 100%, and 97.1% in 1996,
1995, 1994, 1993, and 1992, respectively. The average effective annual rental
per square foot was $11.01, $10.15, $10.67, $10.62, $10.98 for 1996, 1995, 1994,
1993, and 1992, respectively.
The two anchor tenants, Lucky Stores, Inc. ("Lucky Stores"), a
full service grocery store, and Thrifty Drugstore ("Thrifty"), a full service
drug store, occupy 10% or more of the gross leasable area of the Valencia
Property. Lucky Stores occupies 31,842 square feet or 30.8% of the gross
leasable area of the Valencia Property. Thrifty occupies 18,125 square feet or
17.5% of the gross leasable area of the Valencia Property. The principal
provisions of the leases with these anchor tenants are summarized below.
Lucky Stores operates under a lease that commenced on July 1,
1986 and expires June 30, 2006, subject to four five-year renewal options
exercisable by Lucky Stores. The annual base rent is $300,000 per year ($9.42
per square foot). The lease also provides for percentage rent equal to 1.25% of
gross annual sales in excess of $38,000,000, less amounts paid by Lucky Stores
for property taxes and assessments and insurance premiums. The total rent
received from Lucky Stores
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in 1996 was $300,000. If the Valencia Property is occupied or used for
specified, prohibited purposes, the percentage used in calculating percentage
rent will be reduced to an amount not less than 0.625%. Lucky Stores is required
to reimburse the Partnership for a pro rata share of real estate taxes,
insurance and common area maintenance expenses (but Lucky Stores' consent is
required for any single expenditure regarding the maintenance, insurance and
lighting of the Property in excess of $5,000). Lucky Stores has the right to
assign or sublet the lease.
Thrifty operates under a lease that commenced on March 25, 1965
and expires May 31, 2005, subject to four five-year renewal options exercisable
by Thrifty. Rent is payable monthly in an amount equal to 3% of the tenant's
gross sales for the previous month, but not less than $45,000 annually. The
total rent received from Thrifty in 1996 was approximately $137,000. Thrifty is
entitled to remodel its premises at any time, at its owns expense, in which
event it will have the right to withhold one half of the rent payable in any one
full calendar year in excess of the rent paid during the year immediately
preceding the completion of the remodeling, until it has withheld its cost of
remodeling, but not more than $300,000. Thrifty is not required to reimburse the
Partnership for any real estate taxes or operating expenses. Thrifty may not
sublet or assign its space without prior written consent of the Partnership,
except to one of its affiliates.
The other 18 stores in the Old Orchard Shopping Center are
leased to tenants providing a variety of goods and services, including
automotive, fast food, gourmet food, apparel, banking, hardware, specialty
gifts, beauty supplies, dry cleaning and hairstyling. These leases have varying
original lease terms ranging from 3 to 35 years and provide for annual minimum
rents aggregating $760,166 and ranging from $7.24 per square foot to $27.82 per
square foot (a weighted average of $15.07 per square foot). Many of the leases
contain provisions pursuant to which the Partnership is entitled to participate
in specified percentages of tenant's gross receipts above fixed minimum amounts
and to receive reimbursement for the tenant's pro rata share of operating
expenses, including real estate taxes, insurance and common area maintenance
expenses. In addition, many of the leases provide that after the lease expires
the tenant may continue to occupy the space subject to the existing lease,
except that annual minimum rent will increase by 25% to 50%.
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The following table shows selected lease expiration and vacancy
information for the Valencia Property (assuming no renewals or cancellations):
% of Total
Gross 1997 1997
Year of Number of Leasable Annual Annual
Expiration Leases Area Minimum Minimum
of Lease Expiring (Sq.Ft.) Rent Rent
------------ ------------- --------- ---------- ----------
1997 2 1,800 41,524 3.8%
1998 6 17,062 277,886 25.1%
1999 3 6,700 114,323 10.3%
2000 3 11,880 115,773 10.5%
2002 2 3,700 84,750 7.7%
2005 3 27,429 170,910 15.5%
2006 1 31,842 300,000 27.1%
vacancies - 3,000 - -
--- ------- --------- -----
Total 20 103,413 1,105,166 100.0%
== ======= ========= =====
The Valencia Property is subject to real estate taxes at the
rate of 1.41% of assessed valuation. The current assessed valuation of the
Valencia Property is $8,786,000 and the total tax for 1996 on the Valencia
Property is approximately $124,000. Real estate taxes are subject to increases
in the future that may result from reassessment and/or increases in the tax
rate.
The Partnership's adjusted federal income tax basis for the
Valencia Property is approximately $11,237,000 of which $6,500,000 is allocated
to land and $4,737,000 is allocated to the buildings and improvements. For
financial statement purposes the Partnership depreciates the cost of the
buildings over 31.5 years and improvements over 5 to 10 years using the
straight-line method of cost recovery. In the opinion of the General Partner,
the Valencia Property is adequately insured.
Green Valley Mall
Green Valley, Arizona
Location. The Green Valley Property, a mall complex known as the
Green Valley Mall, is situated on an approximately 21.31-acre parcel in the Town
of Green Valley, Arizona. It has frontages on Interstate 19 and Esperanza
Boulevard, with additional access from La Canada Road. Green Valley is a planned
adult community located in Pima County in the Santa Cruz River Valley
approximately 25 miles south of Tucson. Green Valley has a number of hotels and
office buildings, a community center and three 18 hole golf courses. The Green
Valley Property is located at the intersection of Interstate 19 and Esperenza
Boulevard and serves Pima County, as well as Santa Cruz County to the south.
Competition. The Green Valley Property competes directly with
the 142,500 square foot Continental Shopping Plaza located at Continental Road
and Interstate 19 approximately one mile south of the Green Valley Property. The
Continental Shopping Plaza is anchored by a Safeway
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Supermarket. There is a shopping center located 3 miles to the north of the
Green Valley Property which includes a 65,000 square foot Wal-Mart Department
Store and a 42,000 square foot Bashsa Food Store as anchor tenants plus 25,000
square feet of space for local tenants. Another center, which is located to the
north of the Green Valley Property and was anchored by a 45,000 square foot
Kmart and 10,000 square feet of space for local tenants, closed during 1995.
Description of the Property. Green Valley Mall is an open-air
shopping complex originally built in the 1960's and expanded at various times
throughout the 1970's and 1980's. The shopping center is comprised of several
buildings, including some that are free standing, totaling 194,000 gross
leasable square feet (adjusted by 1,550 square feet representing the mall office
and maintenance space). The exterior construction is a combination of adobe
block, split face black and painted concrete block. The mall has approximately
850 parking spaces.
Operating and Tenant Information. As of March 15, 1997, there
were 73 tenants (including three anchor tenants) and 7 vacancies at the Green
Valley Property. The anchor tenants are an ABCO Supermarket (the only tenant
that occupies 10% or more of the gross leasable area of the Green Valley
Property), an Ace Hardware store, and Beall's Outlet. The occupancy rate was
90.2%, 92.0%, 85.4%, 82.8% and 80.0% for 1996, 1995, 1994, 1993, and 1992,
respectively. The average effective annual rental per square foot was $5.56,
$5.31, $5.56, $5.81 and $5.44 for 1996, 1995, 1994, 1993, and 1992,
respectively.
ABCO Supermarket occupies 38,983 square feet or 20.09% of the
gross leasable area of the Green Valley Property. The principal provisions of
the lease with this anchor tenant are summarized below.
ABCO Supermarket operates its store under a lease that expires
July 31, 1999, subject to five five-year renewal options exercisable by ABCO
Supermarket. The annual base rent is $68,060 ($1.75 per square foot). The lease
provides for annual percentage rent equal to 1% of annual gross sales in excess
of $4,000,000. The total rent received from ABCO Supermarket in 1996 was
$90,560. The tenant is required to reimburse the Partnership a pro rata share of
real estate taxes and common area maintenance expenses and is required to
maintain liability insurance of not less than $300,000 for personal injury or
death of any one person, $500,000 for injury or death of any number of persons
in any one incident, and $100,000 for damage to property resulting from any one
incident. ABCO Supermarket may not sublet the space or assign the lease without
the Partnership's consent.
The other 72 tenants in the mall provide a wide variety of
retail goods and services, including fast food, apparel, hair styling,
insurance, books, specialty gifts, mortgage services, accounting, greenery,
printing, and banking. These leases have varying original lease terms ranging
from 1 to 4 years and provide for payment of annual minimum rents aggregating
$981,966 and ranging from $.78 per square foot to $15.75 per square foot (a
weighted average of approximately $6.99 per square foot). Some of the leases
contain provisions pursuant to which the Partnership is entitled to participate
in a specified percentage of the tenant's gross receipts above fixed minimum
amounts. Most of the leases require the tenant to reimburse the Partnership for
all
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or some portion of the tenant's pro rata share of operating expenses including
real estate taxes, insurance and common area maintenance expenses.
The following table shows selected lease expiration (assuming no
renewals or cancellations) and vacancy information:
% of Total
Gross 1997 1997
Year of Number of Leasable Annual Annual
Expiration Leases Area Minimum Minimum
of Lease Expiring (Sq.Ft.) Rent Rent
------------ ----------- ---------- --------- ----------
1997 16 33,661 200,136 19.1%
1998 20 30,814 175,632 16.7%
1999 16 55,473 210,417 20.0%
2000 8 23,343 235,776 22.5%
2001 9 25,506 143,453 13.7%
2002 3 7,091 66,237 6.3%
2003 1 3,675 18,375 1.7%
vacancies - 14,437 - -
-- ------- --------- -----
Total 73 194,000 1,050,026 100.0%
== ======= ========= ======
Although 71% of the current leases expire in the next three
years, the General Partner believes that it will be successful in either
renewing these leases or originating new leases for these spaces. However, no
assurance can be given that the Partnership will be successful at this, and if
so, whether the terms of the leases will be advantageous to the Partnership.
Real estate taxes on the Green Valley Property are based on a
primary tax rate of 7.41% per $100 of assessed value and a secondary tax rate of
4.10% per $100 of assessed value. The Green Valley Property is currently
assessed at $1,254,000 for purposes of the primary rate and $1,256,000 for
purposes of the secondary rate. Real estate taxes for 1996 are approximately
$144,000. Real estate taxes are subject to increases in the future that may
result from reassessment and/or increases in the tax rate.
The Partnership's adjusted federal income tax basis for the
Green Valley Property is approximately $9,669,000, of which $5,100,000 is
allocated to land and $4,569,000 to the buildings and improvements. For
financial statement purposes, the Partnership depreciates the cost of the
buildings over 31.5 years and improvements over 5 to 10 years using the
straight-line method of cost recovery. In the opinion of the General Partner,
the Green Valley Property is adequately insured.
Commitments and Contingencies
Under various Federal, State and local laws and ordinances and
regulations, an owner, operator or developer of real property may be held liable
for the costs of removal or remediation of certain hazardous or toxic substances
(including asbestos containing materials) on or in such
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property. Such laws, ordinances and regulations often impose liability without
regard to whether the owner knew of, or was responsible for, the presence of
hazardous or toxic substances. The cost of any required remediation of any
property and the owner's, operator's or developer's liability therefor is
generally not limited under such laws, ordinances and regulations, and could
exceed the value of the property and/or the aggregate assets of the owner,
operator or developer. While none of the Properties is presently subject to any
environmental actions, the presence of such substances, or the failure to
properly remediate such substances, may adversely affect the ability to sell or
rent the Properties or to borrow using any of the Properties as collateral.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
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PART II
Item 5. Market for Registrant's Units and Related Security Holders
Matters.
(a) Class A and Class B Interests are not traded on any
established public trading market and no organized market has developed for the
interests in the Partnership. Sales of the Class A and Class B Interests occur
from time to time through independent broker-dealers, but to the best of the
Partnership's knowledge, there are no market makers for the interests. Recently
published information relating to other real estate limited partnerships (which
may not be analogous to the Partnership) indicates that sales of limited
partnership interests in those partnerships occur at substantial discounts from
the amounts of the original investments.
(b) As of March 4, 1997, 1,518,800 Class A Interests and
2,111,072 Class B Interests were held by approximately 1,363 and 1,438 holders,
respectively.
(c) The Partnership is a limited partnership and, accordingly,
does not pay dividends. It does, however, make quarterly distributions of cash
to its partners.
Pursuant to the Partnership Agreement, distributable cash flow
(as defined) for each fiscal quarter is distributed as follows: (i) first, 99%
to the holders of the Class A Interests as a group and 1% to the General Partner
until the holders of the Class A Interests have received an amount of cumulative
distributions necessary to provide such holders with a non-compounded 10.5%
cumulative annual return (determined in accordance with the Partnership
Agreement); (ii) next, 90% to the holders of the Class A Interests and 10% to
the General Partner until the holders of the Class A Interests have received
distributions of distributable capital proceeds (i.e., net proceeds of a sale or
other disposition or a refinancing of Properties available for distribution) and
uninvested offering proceeds equal to $10.00 for each Class A Interest plus an
amount of cumulative distributions necessary to provide such holders with a
cumulative, non-compounded 12.5% annual return (determined in accordance with
the Partnership Agreement on their Adjusted Priority Base Amount as defined) (a
"12.5% Priority Return"); and (iii) thereafter, 85% to the holders of the Class
B Interests, 5% to the holders of the Class A Interests and 10% to the General
Partner.
Pursuant to the Partnership Agreement, distributable capital
proceeds are distributed as follows: (i) first, 100% to the holders of the Class
A Interests as a group until they have received distributions of distributable
capital proceeds and uninvested offering proceeds equal to $10.00 for each Class
A Interest plus an amount of cumulative distributions necessary to provide such
holders with a 12.5% Priority Return; and (ii) thereafter, 85% to the holders of
the Class B Interests and 15% to the General Partner.
Distributable cash flow, as defined in the Partnership
Agreement, means, with respect to any period, (i) revenues and payments (which
do not include refundable deposits or unearned rent) of the Partnership received
in cash during such period, and reserves set aside out of revenues during prior
periods and no longer needed for the Partnership's business, but not including
cash
13
<PAGE>
proceeds attributable to a capital transaction (as defined), Bond proceeds or
capital contributions (as defined), less (ii) the sum of (A) amounts paid in
cash by the Partnership during such period for operating expenses of the
Partnership (excluding amounts paid from reserves or funds provided by capital
contributions or loans), for debt payments, and for compensation to a removed
General Partner and other fees or payments to the General Partner, (B) any
capital expenditures with respect to Properties, and (C) any amount set aside
for the restoration, increase or creation of reserves. Distributable cash flow
is deemed to include the amount of any income tax withheld with respect to
revenues that are includable in distributable cash flow.
During its two most recent fiscal years, the Partnership has
made the following cash distributions with respect to the Class A Interests:
Amount of Portion
Distribution Distribution Representing
With Respect Per 100 Class a Return of
To Quarter Ended: A Interests (1) Capital (2)
----------------- --------------- -------------
March 31, 1996 $3.29 $3.29
June 30, 1996 $3.29 $3.29
September 30, 1996 $3.06 $3.06
December 31, 1996 $3.30 $3.30
March 31, 1995 $3.29 $3.29
June 30, 1995 $3.29 $3.29
September 30, 1995 $3.29 $2.74
December 31, 1995 $3.28 $3.28
- ----------------------------------
(1) The amounts listed represent distributions of distributable cash flow.
(2) That portion of the total "Amount of Distribution per 100
Class A Interests" which is a return of capital. Return of
capital is defined as distributions in excess of net income.
There have been no distributions with respect to Class B Interests.
In general, profits are allocated annually among the holders of
Class A Interests and Class B Interests and the General Partner, first in the
ratio and to the extent that they receive distributions of distributable cash
flow. Profits will next be allocated 100% to holders of Class A Interests until
their capital accounts equal the greater of zero or their Adjusted Priority Base
Amounts (as defined in the Partnership Agreement) plus their 12.5% Priority
Return. Any additional profits will be allocated to the holders of Class B
Interests and the General Partner to increase their capital accounts to reflect
the manner in which they are expected to share in further distributions.
14
<PAGE>
Gain arising upon the sale of a Property or otherwise is
allocated first to holders of Class A Interests and Class B Interests and the
General Partner to eliminate any deficits in their capital accounts, and then to
the holders of the Class A Interests and Class B Interests and the General
Partner to increase their capital accounts to reflect the manner in which they
are expected to share in further distributions.
In general, losses are allocated first to the holders of Class B
Interests and the General Partner in the ratio and to the extent of any positive
balances in their capital accounts; then, to the holders of Class A Interests to
the extent of any positive balances in their capital accounts; and finally, 100%
to the General Partner.
Item 6. Selected Financial Data.
The following sets forth a summary of the selected financial
information for the Partnership. The information below should be read in
conjunction with the audited financial statements included elsewhere in this
Report.
(a) All income allocated with respect to Equity Units was
allocated with respect to the 100 Class A Interests in each such unit. No income
was allocated with respect to Class B Interests.
(b) The net (loss) income per 100 Class A Interests has been
calculated by dividing the net (loss) income for the period by the average
number of Class A Interests outstanding for the period and multiplying that
quotient by 100.
(c) Distributions have been allocated based upon the dates that
Class A Interests were issued. Distributions with respect to each fiscal quarter
of the Partnership are paid 60 days following the end of that fiscal quarter. No
distributions were paid with respect to Class B Interests.
(d) Return of Capital is defined as distributions in excess of
net income.
15
<PAGE>
CONCORD MILESTONE PLUS, L.P.
(A Limited Partnership)
Selected Financial Data
<TABLE>
<CAPTION>
For Year For Year For Year For Year For Year
Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31,
1996 1995 1994 1993 1992
------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Operating Statement Data:
Revenue $3,009,663 $3,061,279 $3,156,657 $3,106,835 $3,194,233
Net (loss) income (238,119) (307,810) (1,317,075) (1,225,028) (225,900)
Balance Sheet Data:
Total assets $22,086,775 $22,537,617 $23,005,298 $24,386,240 $26,125,939
Long term debt 16,473,060 16,425,967 16,334,737 16,217,540 16,071,155
Total liabilities 16,877,282 16,893,481 16,853,645 16,717,506 16,632,859
Statement of Partners' (Deficit) Capital:
General Partner ($70,470) ($66,124) ($61,049) ($45,878) ($27,635)
Class A Interests 5,279,963 5,710,260 6,212,702 7,714,612 9,520,715
Class B Interests 0 0 0 0 0
Total 5,209,493 5,644,136 6,151,653 7,668,734 9,493,080
Per 100 Class A Interests (a):
Net (loss) income (b):
First quarter ($3.71) ($3.29) ($4.79) ($4.06) ($3.17)
Second quarter (3.56) (5.06) (5.88) (5.75) (5.45)
Third quarter (3.35) 0.55 2.37 (5.26) (5.80)
Fourth quarter (5.05) (12.47) (78.42) (65.59) (0.45)
Distributions (c):
First quarter $3.29 $3.29 $3.26 $9.44 $10.25
Second quarter 3.29 3.29 3.26 7.85 8.27
Third quarter 3.06 3.29 3.26 8.79 8.17
Fourth quarter 3.30 3.28 3.26 3.26 12.99
Return of Capital (d):
First quarter $3.29 $3.29 $3.26 $9.44 $10.25
Second quarter 3.29 3.29 3.26 7.85 8.27
Third quarter 3.06 2.74 0.89 8.79 8.17
Fourth quarter 3.30 3.28 3.26 3.26 12.99
</TABLE>
16
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
The Partnership commenced a public offering of Equity Units and
Bond Units (together, "Units") on April 8, 1987 in order to fund the
Partnership's real property acquisitions. The Partnership terminated the public
offering of Units on April 2, 1988. On April 14, 1988, the Partnership held its
final closing on the sale of Units. The Partnership was fully subscribed to with
a total of 16,452 Bond Units and 15,188 Equity Units from which the Partnership
received aggregate net proceeds (after deduction of sales commissions, discounts
and selling agent's expense otherwise required to be reimbursed to the General
Partner and its Affiliates) of $29,285,960. Of such total amounts, 15,954 Bond
Units and 15,188 Equity Units were sold by the Partnership during 1988 from
which the Partnership received net proceeds (after deduction of sales
commissions, discounts and selling agent's expense allowance and credit for
organization and offering expenses) of $19,599,176.
A portion of the total proceeds from the sale of Units was used
to acquire three shopping centers, the Searcy Property, the Valencia Property,
and the Green Valley Property, which carry mortgages of $2,632,500, $7,523,500
and $6,296,000, respectively. There were no principal repayments through
December 31, 1996. New borrowings to purchase property amounted to approximately
$14,478,000 and $481,000 during 1988 and 1987, respectively. There have been no
additional borrowings to acquire property.
The Partnership has an agreement with Milestone Property
Management, Inc. ("MPMI"), an affiliate of the General Partner, to provide
management services to the Partnership's properties. In addition, MPMI is
responsible for leasing space at the properties and actively monitors all
vacancies to ensure the highest occupancy rate possible.
All leasing is performed by MPMI and the terms of the leases are
negotiated on a lease by lease basis. The Partnership does not have a set policy
regarding discounts and rental concessions; however, late in 1994 the
Partnership began to give rental concessions and discounts more frequently in
order to increase occupancy. In 1996, most new leases included some form of
rental concession or discount. The total amount of rental concessions and
discounts given to tenants in 1996 was approximately $57,000. For the period
ended March 15, 1997, the total amount of rental concessions and discounts given
to tenants for new leases was approximately $21,000.
17
<PAGE>
Changes in Competitive Conditions
Searcy Property
Over the past few years, the Searcy Property has been
experiencing difficulties stemming from the relocation of the adjacent Wal-Mart
(which is under separate ownership) in 1992. In 1994, the Partnership found it
necessary to negotiate rent reductions on lease renewals (approximately 25% in
some instances) in order to prevent vacancies. However, over the last two years,
this trend has been reversing as tenant sales have increased in 1995 and 1996 as
evidenced by the increase in percentage rent revenue.
Tenant sales increased primarily due to the sale of Beall
Ladymon to Specialty Retailer, Inc. (a current tenant) in 1995. The store was
completely remodeled and remerchandised, which increased traffic and exposure
for the other tenants. In addition, in 1996, the Partnership successfully
negotiated an expansion with J.C. Penney, a current tenant, to increase their
existing space by 12,902 square feet effective January 1, 1997. J.C. Penney
expanded into 5,600 square feet of space previously occupied by smaller tenants
in 1996. J.C. Penney has plans to build an expansion on the remaining 7,302
square feet of unoccupied land sometime in 1997. The General Partner believes
the 1997 expansion will positively affect the center by increasing traffic for
the other tenants. Also adding to the positive traffic flow at the center is the
leasing of the former Wal-Mart store. Utilizing this space is a Books-A-Million,
a discount book store with a coffee shop and card store. The General Partner
believes that this bookstore will be an excellent draw to the center. Based on
these factors, the General Partner believes that the Partnership may gradually
increase rents as leases are renewed or originated.
Valencia Property
The Valencia Property has a number of competing shopping
facilities within the immediate area. In the spring of 1996, a 78,000 square
foot shopping center opened on Old Orchard Street across from the Valencia
Property. This center includes a 46,000 square foot Ralph's Supermarket, a
16,000 square foot drugstore and 16,000 square feet of smaller stores. This
shopping center had an adverse impact on tenant sales as evidenced by a drop in
percentage rent revenue in 1996 but it has not materially adversely affected the
occupancy rate at the Valencia Property.
On January 17, 1994, the Valencia Property sustained damage
resulting from an earthquake that occurred in Southern California. Proceeds from
the related insurance claim totaled $587,333 and the Partnership had incurred
and paid repairs and expenses for this amount as of December 31, 1995. The
General Partner believes that the repairs at the Valencia Property have had a
positive impact on the center. The remodeling of the fascia canopy and center
lighting have given the center a more contemporary look.
18
<PAGE>
Green Valley Property
Over the past few years, the Green Valley Property has been
experiencing leasing problems in the face of an increasingly difficult and over
built market. The strong competition combined with the limited trade area
required capital improvements in 1994 and 1995 (such as canopies, painting, new
signage and general appearance) in order to attract new tenants and maintain the
existing tenants. During 1995, to maintain occupancy, the Partnership had to
negotiate rent reductions on lease renewals and had to lower the average
effective rental on new leases. All these factors have had a positive effect on
the leasing activity at the mall in 1996. New tenants have come into the mall
and the Partnership has been successful in negotiating several lease renewals.
This has allowed the Partnership to maintain the occupancy rate at around 90%
throughout the year.
In 1993 and 1994, the General Partner determined, based on the
current market conditions and projected future cash flows that the Green Valley
Property had experienced a decline in market value that was other than temporary
and recorded a $1,000,000 and $1,085,932, respectively, non-cash charge against
earnings to write down the property. In 1996 and 1995, in accordance with SFAS
No. 121, "Accounting for Impairment for Long-Lived Assets" (issued March 1995),
the General Partner determined that an additional write down was not necessary
based on the projected future cash flows of the Property.
The General Partner continues to aggressively manage and promote
the Partnership's properties in order to position them to capitalize on any
opportunities which may arise in the future.
Results of Operations
Comparison of Year Ended December 31, 1996 to 1995.
Revenues of the Partnership decreased $51,616, or 1.69%, to
$3,009,663 in 1996 from $3,061,279 in 1995 primarily due to the net effect of
the following:
(1) Searcy Property - A decrease in revenues at the
Searcy Property of $32,053, or 7.26%, to $409,186 in
1996 from $441,239 in 1995. Revenues declined in 1996
primarily as a result of the drop in the occupancy
rate to 92.9% in 1996 from 95.5% in 1995. The drop in
occupancy was due to leaving certain spaces vacant in
order to accommodate J.C. Penney's expansion.
(2) Valencia Property - A decrease in revenues at the
Valencia Property of $34,045, or 2.45%, to $1,354,547
in 1996 from $1,388,592 in 1995. Revenues declined in
1996 primarily as a result of a decrease in
percentage rent revenue of approximately $36,000 due
to decreased tenant sales.
19
<PAGE>
(3) Green Valley Property - A decrease in revenues at the
Green Valley Property of $7,458, or .62% to
$1,196,679 in 1996 from $1,204,137 in 1995. Revenues
declined in 1996 primarily due to the net effect of
(1) an increase in percentage rent revenue of
approximately $23,000 due to increased tenant sales,
(2) a decrease in reimbursed revenue of approximately
$31,000 due to decreased management and property
expenses in 1996.
(4) Other Income - A decrease in interest income of
approximately $8,500 earned on the Partnership's
money market account in 1996.
Property operating expenses decreased $110,067, or 10.79%, to
$909,978 in 1996 from $1,020,045 in 1995 primarily due to the net effect of the
following:
(1) Searcy Property - A decrease in management and
property expenses at the Searcy Property of $6,028,
or 6.54%, to $86,168 in 1996 from $92,196 in 1995.
Management and property expenses declined in 1996
primarily as a result of a general decrease in
operating expenses in 1996.
(2) Valencia Property - A decrease in management and
property expenses at the Valencia Property of
$29,294, or 9.90%, to $266,470 in 1996 from $295,764
in 1995. Management and property expenses declined in
1996 primarily due to a decrease in insurance expense
of approximately $18,000 due to a lower premium in
1996.
(3) Green Valley Property - A decrease in management and
property expenses at the Green Valley Property of
$69,473, or 11.08%, to $557,340 in 1996 from $626,813
in 1995. Management and property expenses declined
in 1996 primarily due to (1) a decrease in sales tax
expense of approximately $12,000 due to a decrease in
the tax rate to 1% in 1996 from 2% in 1995, (2) a
decrease in repairs and maintenance of approximately
$23,000 and (3) a decrease in insurance expense of
approximately $14,000 due to a lower premium in 1996.
Professional fees and other expenses decreased $37,272, or
22.37%, to $129,324 in 1996 from $166,596 in 1995 primarily due to the net
effect of (1) a decrease in legal fees of approximately $51,000 due to the
settlement in 1995 of a civil rights suit brought against it by a former
employee, and (2) an increase in accounting fees of approximately $10,000 due to
an increase in audit fees in 1996.
Interest expense increased $44,557, or 2.92%, to $1,569,795 in
1996 from $1,525,238 in 1995 primarily due to the scheduled increase in the
interest rate on the Bond Mortgage from 9.50% in 1995 to 10.0% in 1996.
20
<PAGE>
Depreciation and amortization expense decreased $18,525, or
2.82%, to 638,685 in 1996 from $657,210 in 1995 primarily due to the net effect
of (1) an increase in depreciation expense of approximately $27,000 due to
building improvement expenditures in 1996, and (2) a decrease in amortization
expense of approximately $46,000 due to a decrease in the amortization of the
net bond premium and discount in 1996.
Comparison of Year Ended December 31, 1995 to 1994.
Revenues of the Partnership decreased $95,378, or 3.0%, to
$3,061,279 in 1995 from $3,156,657 in 1994 primarily due to the net effect of
the following:
(1) Searcy Property - an increase in revenues at the
Searcy Property of $21,482, or 5.1%, to $441,239 in
1995 from $419,757 in 1994 due to the net effect of
the following: a) a decrease in base rent of
approximately $22,000 due to a special agreement
reached with a tenant in late 1994 whereby the tenant
is required to pay percentage rent in lieu of all
rental obligations (this agreement was reached due to
the relocation of the Wal-Mart in 1992), b) an
increase in percentage rent of approximately $37,000
due to the special agreement stated in a) above and
due to improved tenant sales in 1995 and c) an
increase in tenant reimbursements of approximately
$5,400 due to an increase in common area maintenance
expenses in 1995,
(2) Valencia Property - a decrease in revenues at the
Valencia Property of $38,883, or 2.7%, to $1,388,592
in 1995 from $1,427,475 in 1994 due to the net effect
of the following: a) an increase in base rent of
approximately $16,000 due to an increase in the
occupancy rate in 1995, b) an increase in percentage
rent of approximately $10,000 due to improved tenant
sales and increased occupancy at the Valencia
Property and c) a decrease in tenant reimbursements of
approximately $64,000 due to:
(i) a decrease in real estate tax reimbursements of
approximately $44,000 due to a refund of 1990 taxes
received in 1994 and included in real estate tax
reimbursements in 1994,
(ii) a decrease in common area maintenance reimbursements
of approximately $17,000 due to the fact that the
Partnership decided not to bill certain items to the
tenants in 1995 that were billed in 1994, and
(iii) a decrease in insurance reimbursements of
approximately $2,500 due to a lower premium in 1995,
21
<PAGE>
(3) Green Valley Property - a decrease in revenues at the
Green Valley Property of $87,517, or 6.8% to
$1,204,137 in 1995 from $1,291,654 in 1994 due to the
net effect of the following: a) an increase in base
rent of approximately $5,000 due to an increase in
the occupancy rate in 1995 , b) a decrease in
percentage rent of approximately $28,000 due to
decreased tenant sales, c) a decrease in tenant
reimbursements of approximately $66,000 due to:
(i) a decrease in real estate tax reimbursements of
approximately $2,000 due to a decrease in real estate
tax expense,
(ii) a decrease in sales tax reimbursements of
approximately $12,000 due to a decrease in the
Arizona sales tax rate from 3 percent to 2 percent in
1995,
(iii) a decrease in management fee income of approximately
$8,600 due to decreased rental revenue,
(iv) a decrease in common area maintenance of
approximately $40,000 due to the fact that the
Partnership decided not to bill certain items to the
tenants in 1995 that were billed in 1994 and due to a
decrease in common area maintenance expenses in 1995,
and
(v) a decrease in insurance reimbursements of
approximately $3,000 due to a lower insurance premium
in 1995, and
(4) Other Income - a general increase in interest income
of approximately $10,000 earned on the Partnership's
money market account in 1995.
Property operating expenses decreased $64,220, or 5.9%, to
$1,020,145 in 1995 from $1,084,365 in 1994 primarily due to the net effect of
the following:
(1) Searcy Property - an increase in management and
property expenses at the Searcy Property of $4,968,
or 5.7%, to $92,196 in 1995 from $87,228 in 1994 due
to the net effect of the following: a) a general
increase in common area maintenance expense of
approximately $8,600 due to an increase in repairs
and maintenance as a result of property aging, and b)
a decrease in insurance expense of approximately
$3,800 due to a lower premium in 1995,
(2) Valencia Property - an increase in management and
property expenses at the Valencia Property of $1,279,
or .43%, to $295,764 in 1995 from $294,485 in 1994
due to the net effect of the following: a) an
increase in real estate tax expense of approximately
$13,000, b) a decrease in insurance expense of
approximately $17,000 due to a lower premium in 1995,
and c) an increase in common area expenses of
approximately $5,000,
22
<PAGE>
(3) Green Valley Property - a decrease in management and
property expenses at the Green Valley Property of
$71,411, or 10.2%, to $626,813 in 1995 from $698,224
in 1994 due to the net effect of the following: a) a
decrease in real estate tax expense of approximately
$8,000, b) a decrease in sales tax expense of
approximately $12,000 due to a decrease in the
Arizona sales tax rate from 3 percent to 2 percent
during 1995, c) a decrease in common area expenses of
approximately $33,000 primarily in an effort by
management to improve the net operating income of the
property, and d) a decrease in insurance expense of
approximately $18,000 due to a lower premium in 1995.
Professional fees and other expenses increased $41,160, or 32.8%
to $166,496 in 1995 from $125,336 in 1994 primarily due to the net effect of the
following:
(1) An increase in legal fees of approximately $55,000
due to the settlement in 1995 of a civil rights suit
brought against it by a former employee, and
(2) a decrease in promotions and advertising at all
properties of approximately $13,000 in a cost
savings effort by management in 1995.
Interest expense increased $41,130, or 2.8%, to $1,525,238 in
1995 from $1,484,108 in 1994 primarily due to the scheduled increase in the
interest rate on the Bond Mortgage from 9.25% in 1994 to 9.50% in 1995.
Depreciation and amortization expense decreased $36,775, or
5.3%, to $657,210 in 1995 from $693,985 in 1994 primarily due to a decrease in
the amortization of the Bond discount in 1995. The Bond discount is amortized
using the effective interest method.
Liquidity and Capital Resources
The Bonds mature on November 30, 1997, at which time the
outstanding principal balance of $16,452,000 will be due. The Partnership has
not yet obtained any commitments for refinancing and has not entered into any
agreements to sell any of the Properties.
The partnership is currently seeking to refinance the Properties
and Tristone Mortgage Company ("Tristone"), an affiliate of the General Partner,
is assisting the Partnership, without compensation, in obtaining suitable
refinancing. In the event that a refinancing sufficient to satisfy the Bonds
appears unlikely, the General Partner will attempt to sell one or more of the
Properties. The General Partner believes that the Partnership will be able to
obtain adequate proceeds from a refinancing or sale of the Properties, or a
combination of the two, to enable the Partnership to satisfy the Bonds on or
prior to their maturity. Nevertheless, there can be no assurance the Partnership
will be able to raise sufficient proceeds through a refinancing or sale prior to
the Bond maturity date, or that the terms of any such refinancing or sale will
be attractive to the Partnership. In the event that the Partnership is unable to
raise adequate funds to satisfy the Bonds at maturity, there is a risk of
foreclosure under the Bond Mortgages.
23
<PAGE>
Assuming that the Partnership is able to raise sufficient funds
to satisfy the Bonds on or before November 30, 1997, the General |Partner
believes that the Partnership will have sufficient working capital to meet its
operating requirements through the next 12 months. Nevertheless, because the
cash revenues and expenses of the Partnership will depend on future facts and
circumstances relating to the Properties, as well as market and other conditions
beyond the control of the Partnership, the possibility exists that cash flow
deficiencies may occur. There are currently no material commitments for capital
expenditures.
Net cash provided by operating activities of $400,756 for the
year ended December 31, 1996 included a (i) net loss of $238,119, (ii)
adjustment of $638,685 for depreciation and amortization, and (iii) a net change
in operating assets and liabilities of $190.
Net cash provided by operating activities of $284,611 for the
year ended December 31, 1995 included a (i) net loss of $307,810, (ii)
adjustments of $657,210 for depreciation and amortization and (iii) a net change
in operating assets and liabilities of $64,789.
Cash used in investing activities of $96,984 for the year ended
December 31, 1996 included capital expenditures for building improvements at all
three properties.
Cash used in investing activities of $210,052 for the year ended
December 31, 1995 included capital expenditures for building improvements at the
Valencia Property and the Green Valley Property.
Cash used in financing activities of $196,524 for the year
ended December 31, 1996 included cash distributions to partners.
Cash used in financing activities of $199,707 forthe year ended
December 31, 1995 included cash distributions to partners.
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary data, shown by index
on page 34, begin on page 35 of this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
24
<PAGE>
PART III
Item 10. Directors and Officers of the Registrant.
The names, offices held and the ages of the directors and
executive officers of the General Partner and of CMP Beneficial Corp. are as
follows:
Has Served As a
Director and/or
Name Age Position Held Officer Since (1)
- --------------------- --- ------------------ --------------------
Leonard S. Mandor (3) 50 President Inception (2)
and Director
Robert A. Mandor (3) 44 Vice President Inception
and Director
Harvey Shore 51 Vice President December 24, 1987
Joan LeVine 46 Treasurer/ Inception
Secretary October 1, 1988
- ----------------------------------
(1) Each director and officer of the General Partner and CMP
Beneficial Corp. will hold office until the next annual
meeting of the General Partner and CMP Beneficial Corp.
and until his successor is elected and qualified.
(2) The General Partner was incorporated on December 12, 1986
and CMP Beneficial Corp. was incorporated on December 18,
1986.
(3) Robert A. Mandor and Leonard S. Mandor are brothers.
LEONARD S. MANDOR is the Chief Executive Officer and a Director of
Concord. For at least the past five years, Mr. Mandor has served as general
partner in 22 Concord-sponsored private real estate programs and is the
Chairman of the Board, Chief Executive Officer and a Director of Milestone
Properties, Inc. Mr. Mandor has been associated with Concord since its
inception in 1981.
ROBERT A. MANDOR is the President and a Director of Concord. For
at least the past five years he has served as the President, Chief Financial
Officer, and a Director of Milestone Properties, Inc. Mr. Mandor has been
associated with Concord since its inception.
25
<PAGE>
HARVEY SHORE (f/k/a Harvey Schuldwach) joined Concord in 1983 and
is the Senior Vice President. He also serves as a Senior Vice President and
Secretary of Milestone Properties, Inc. Before joining Concord he worked at
Chase Manhattan Bank as a Vice President.
JOAN LeVINE (f/k/a Joan Maisano), joined Concord in 1984 and is
Vice President, Treasurer and Controller. She also serves as a Senior Vice
President and Treasurer of Milestone Properties, Inc. Ms. LeVine is a certified
public accountant and is a member of the American Institute of Certified Public
Accounts.
On February 2, 1995, the Securities and Exchange Commission filed
a civil complaint against Concord in the United States District Court for the
District of Columbia in connection with the proxy solicitation conducted with
respect to the merger of Concord Milestone Income Fund, L.P. and Concord
Milestone Income Fund II, L.P. into a publicly held corporation, Milestone
Properties, Inc., in 1990. The complaint alleged that Concord (of which Leonard
and Robert Mandor are the owners and are officers and directors) violated the
anti-fraud provisions of the Securities Exchange Act of 1934 through the forgery
of investors' signatures on proxy cards and further alleged that Concord failed
to provide certain investors in the affected partnerships with lists of
partners, as required under the proxy rules. In April, 1995, Concord consented,
without admitting or denying the Commission's allegations, to the entry of a
final judgment ordering it to pay a civil penalty of $500,000 and enjoining it
from violating Section 17(a) of the Securities Act of 1933 and Sections 10(b)
and 14(a) of the Securities Exchange Act of 1934 and Rules 10b-5 and 14a-7
thereafter.
Compliance with Section 16(a) of the Exchange Act.
Based on the General Partner's review of Forms 3, 4 and 5
furnished to the Partnership, there were no late reports filed during 1996.
Item 11. Compensation.
During 1996, the Partnership paid or accrued:
(i) Pursuant to the Partnership Agreement, $1,965 to the General
Partner as a distribution of distributable cash flow (See
Item 5 "Market for Registrant's Units and Related Security
Holders Matters" of this Report for a description of
distributable cash flow).
(ii) $25,000 to Milestone Property Management, Inc. ("MPMI"), an
affiliate of the General Partner, for administrative
services rendered to the Partnership. Pursuant to an
agreement between MPMI and the Partnership, the Partnership
reimburses MPMI for administrative services provided to the
Partnership, such as payroll, rent, supplies and utilities,
in an amount equal to $25,000 per year.
(iii) $107,007 to MPMI for property management fees for the fiscal
year ended December 31, 1996. Pursuant to the management
agreement between the Partnership and
26
<PAGE>
MPMI, property management fees are equal to a percentage of
gross revenues not to exceed 5 percent for multiple tenant
property for which MPMI performs leasing services, 3 percent
for multiple tenant property for which MPMI does not perform
leasing services and 1 percent for single tenant property.
The management fees are 3 percent for the Searcy Property, 4
percent for the Valencia Property and 5 percent for the
Green Valley Property. The management fee for any Property
may not exceed competitive fees for comparable services
reasonably available to the Partnership in the same
geographic area as the property in question. Gross revenues
are defined in the management agreement to mean, with
respect to each Property, all base, additional and
percentage rents collected from the Property but exclude all
other receipts or income with respect to that Property, such
as, (i) receipts arising out of any sale of assets or of all
or part of the Property, condemnation proceeds and other
items of a similar nature; (ii) payments made by tenants for
over-standard finish out improvements or other amortization;
(iii) income derived from interest on investments, security
deposits utility deposits; (iv) proceeds of claims under
insurance policies; (v) abatements or reductions of taxes;
(vi) security deposits made by tenants; or (vii) any
portions of rentals which are specifically designated as
amortization of, or interest on, tenant moving expenses,
takeover expenses or similar items in the nature of advances
by the Partnership.
No officer, director, or employee of the General Partner received
any direct compensation from the Partnership during the fiscal year ended
December 31, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) The General Partner does not know of any beneficial owner of
five percent or more of the issued and outstanding Class A Interests. The
General Partner knows of only one owner of five percent or more of the issued
and outstanding Class B Interests, the information as to which is set forth
below as of March 4, 1997:
Amount and
Nature of Percent
Title Name and Address of Beneficial of
of Class Beneficial Owner Ownership Class
- --------- ------------------ ----------- -------
Class B The Guardian Life 572,292* 27.1%
Interests Insurance Company
of America
203 Park Avenue South
New York, NY 10003
- -----------------------
* To the best of the Partnership's knowledge, The Guardian Life
Insurance Company of America has sole voting power and investment
power with respect to these securities.
27
<PAGE>
(b) The General Partner, together with its affiliates and the
officers and directors of the General Partner, own less than 1% of the issued
and outstanding Class A Interests and less than 1% of the issued and outstanding
Class B Interests.
The number of shares of stock, no par value, of Concord (which is
the parent of the General Partner) beneficially owned by all directors of the
General Partner and CMP Beneficial Corp. and all directors and officers of the
General Partner and CMP Beneficial Corp. as a group as of March 4, 1997 is set
forth in the following table:
Amount and
Nature of Percent
Name of Beneficial Beneficial of
(1) Beneficial Owner (2) Ownership (3) Class
- ----------------- ------------ ----------
Leonard S. Mandor 332 83%
Robert A. Mandor 68 17%
Item 13. Certain Relationships and Related Transactions.
See Items 1, "Business," 5, "Market for Registrant's Units and
Related Security Holders Matters," 10, "Directors and Officers of the
Registrant," and 11, "Compensation," of this Report for details. See also Note 5
of the Notes to Financial Statements of the Partnership's Financial Statements
included in this Report.
28
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Financial Schedule, and Reports
on Form 8-K.
(a) Financial Statements and Financial Schedule
See Index to Financial Statements and Financial Schedule
included herewith on page 34 of this Report.
(b) No reports of Form 8-K were filed for the three months ended
December 31, 1996.
(c) Exhibits:
Location of
Exhibit in
Sequential
Exhibit Numbering
Number Description of Document System
- --------- ----------------------- ----------
3.1 Amended and Restated Agreement of Limited Partnership
of Concord Milestone Plus, L.P. Incorporated herein by
reference to Exhibit A to the Registrant's Prospectus
included as Part I of the Registrant's Post-Effective
Amendment No. 3 ("Post-Effective Amendment No. 3") to
the Registrant's Registration Statement on Form S-11
which was declared effective on April 3, 1987 (the
"Registration Statement").
3.2 Amendment No. 1 to Amended and Restated Agreement of
Limited Partnership of Concord Milestone Plus, L.P.,
included as Exhibit 3.2 to Registrant's Form 10-K for
the fiscal year ended December 31, 1987 ("1987 Form
10-K"), which is incorporated herein by reference.
3.3 Amendment No. 2 to Amended and Restated Agreement of
Limited Partnership of Concord Milestone Plus, L.P.
included as Exhibit 3.3 to the 1987 Form 10-K,
which is incorporated herein by reference.
3.4 Amendment No. 3 to Amended and Restated Agreement of
Limited Partnership of Concord Milestone Plus, L.P.
included as Exhibit 3.4 to the 1987 Form 10-K,
which is incorporated herein by reference.
29
<PAGE>
3.5 Amendment No. 4 to Amended and Restated Agreement of
Limited Partnership of Concord Milestone Plus, L.P.
included as Exhibit 3.5 to the 1987 Form 10-K,
which is incorporated herein by reference.
3.6 Amendment No. 5 to Amended and Restated Agreement of
Limited Partnership of Concord Milestone Plus, L.P.
included as Exhibit 3.6 to Registrant's Form 10-K
for the fiscal year ended December 31, 1988 ("1988
Form 10-K) which is incorporated herein by reference.
4. Form of Indenture relating to Escalating Rate
Collateralized Mortgage Bonds due November 30, 1997
between Concord Milestone Plus, L.P. and United States
Trust Company of New York, as Trustee. Incorporated
herein by reference to Exhibit 4 to the Registration
Statement.
4.1 Form of Supplemental Indenture. Incorporated herein
by reference to Exhibit 4.7 to the Registrant's
Post-Effective Amendment No. 1 ("Post-Effective
Amendment No. 1") to the Registration Statement.
4.2 Form of Escalating Rate Collateralized Mortgage Bond
due November 30, 1997 included as Exhibit 4.2 to the
1987 Form 10-K, which is incorporated herein by
reference.
4.3 Form of certificate evidencing Class A Interests
included as Exhibit 4.3 to the 1987 Form 10-K,
which is incorporated herein by reference.
4.4 Form of certificate evidencing Class B Interests
included as Exhibit 4.4 to the 1987 Form 10-K,
which is incorporated herein by reference.
10.1 Property purchase agreements. Incorporated herein by
reference to Exhibit 10.1 to the Registration
Statement.
10.2 Form of property management agreement. Incorporated
herein by reference to Exhibit 10.2 of the
Registration Statement.
30
<PAGE>
10.3 First Amendment to Management Agreement by and between
Concord Milestone Plus, L.P. and Concord Assets
Management, Inc. Incorporated herein by reference to
Exhibit 10.3 of the 1988 Form 10-K.
10.4 Second Amendment to Management Agreement by and
between Concord Milestone Plus, L.P. and Concord Assets
Management, Inc. Incorporated herein by reference to
Exhibit 10.4 of the 1988 Form 10-K.
10.5 Omitted intentionally.
10.6 Omitted intentionally.
10.7 Mortgage Promissory Note executed by Concord Milestone
Plus, L.P. in favor of United States Trust Company of
New York, as trustee, in the principal amount of
$7,523,500 and secured by a mortgage on certain
property located in Valencia, California.
Incorporated herein by reference to Exhibit 10.5 to
the 1987 Form 10-K.
10.8 Mortgage Promissory Note executed by Concord Milestone
Plus, L.P. in favor of United States Trust Company as
trustee, in the principal amount of $6,296,000 and
secured by a mortgage on a certain property located in
Green Valley, Arizona. Incorporated herein by
reference to Exhibit 10.8 to the 1988 Form 10-K.
10.9 Deed of Trust and Uniform Commercial Code Security
Agreement and Financing Statement with Assignment of
Leases, Rents and Profits executed by Concord
Milestone Plus, L.P. in favor of United States Trust
Company of New York, as trustee, with respect to
property located in Valencia, California.
Incorporated herein by reference to Exhibit 10.6 to
the 1987 Form 10-K.
31
<PAGE>
10.10 Mortgage Deed of Trust and Uniform Commercial Code
Security Agreement and Financing Statement with
Assignment of Leases, Rents and Profits, in favor of
United States Trust Company of New York, as trustee,
with respect to certain property located in Green
Valley, Arizona. Incorporated herein by reference to
Exhibit 10.10 to the 1988 Form 10-K.
10.11 Amended and Restated Mortgage Promissory Note executed
by Concord Milestone Plus, L.P. in favor of United
States Trust Company of New York, as trustee, in the
principal amount of $2,632,500 and secured by a
mortgage on certain property located in Searcy,
Arkansas. Incorporated herein by reference to Exhibit
10.7 of the 1987 Form 10-K.
10.12 Mortgage, Deed of Trust and Uniform Commercial Code
Security Agreement and Financing Statement with
Assignment of Leases, Rents and profits by Concord
Milestone Plus, L.P. in favor of United States Trust
Company of New York, as trustee, with respect to
property located in Searcy, Arkansas. Incorporated
herein by reference to Exhibit 10.8 of the 1987
Form 10-K.
10.13 Modification of Mortgage, Deed of Trust and Uniform
Commercial Code Security Agreement and Financing
statement with Assignment of Leases, Rents and Profits
by Concord Milestone Plus, L.P. in favor of United
States Trust Company of New York, as trustee, with
respect to property located in Searcy, Arkansas.
Incorporated herein by reference to Exhibit 10.9 of
the 1987 Form 10-K.
10.14 Second Modification to Mortgage, Deed of Trust and
Uniform Commercial Code Security Agreement and
Financing Statement with Assignment of Leases, Rents
and Profits by Concord Milestone Plus, L.P. in favor
of United States Trust Company of New York, as
trustee, with respect to property located in Searcy,
Arkansas. Incorporated herein by reference to Exhibit
10.10 of the 1987 Form 10-K.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunder duly authorized on March 24, 1997.
CONCORD MILESTONE PLUS, L.P.
By: CM PLUS CORPORATION,
General Partner
By: /s/ Leonard S. Mandor
-----------------------------
Leonard S. Mandor, President
CMP BENEFICIAL CORP.
(Registrant of Beneficial Interests)
By: /s/ Leonard S. Mandor
-----------------------------
Leonard S. Mandor, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed by the following persons in the capacities and on the dates
indicated.
By: /s/ Leonard S. Mandor March 24, 1997
-----------------------------------------------
Leonard S. Mandor
President (principal executive Officer)
and Director of CM Plus Corporation and
CMP Beneficial Corp.
By: /s/ Robert A. Mandor March 24, 1997
-----------------------------------------------
Robert A. Mandor
Vice President and Director of CM Plus
Corporation and CMP Beneficial Corp.
By: /s/ Joan LeVine March 24, 1997
-----------------------------------------------
Joan LeVine
Secretary and Treasurer (principal
financial and accounting officer) of CM
Plus Corporation and CMP Beneficial Corp.
33
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULE
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
1. Financial Statements:
a. Concord Milestone Plus, L.P.
1. Independent Auditors' Report.................................................................. 35
2. Balance Sheets, December 31, 1996 and December 31, 1995....................................... 36
3. Statements of Revenues and Expenses for the Years Ended
December 31, 1996, 1995 and 1994.............................................................. 37
4. Statements of Changes in Partners' Capital for the Years
Ended December 31, 1996, 1995, 1994........................................................... 38
5. Statements of Cash Flows for the Years Ended December
31, 1996, 1995 and 1994...................................................................... 39
6. Notes to Financial Statements................................................................. 40
2. Financial Schedule:
a. Real Estate and Accumulated Depreciation (Schedule III)........................................... 48
b. Schedules not filed:
All Schedules except Schedule III have been omitted as the
required information is not applicable or the information is
shown in the financial statements or notes thereto.
</TABLE>
34
<PAGE>
INDEPENDENT AUDITORS' REPORT
Concord Milestone Plus, L.P.:
We have audited the accompanying balance sheets of Concord Milestone Plus, L.P.
(The "Partnership") as of December 31, 1996 and 1995 and the related statements
of revenues and expenses, changes in partners' capital and cash flows for the
years ended December 31, 1996, 1995, and 1994. Our audits also included the
financial statement schedule of real estate and accumulated depreciation. These
financial statements and financial statement schedule of real estate and
accumulated depreciation are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on the financial statements and
financial statement schedule of real estate and accumulated depreciation based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership at December 31, 1996 and
1995, and the results of its operations, changes in its partners' capital and
its cash flows for the years ended December 31, 1996, 1995 and 1994 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule of real estate and accumulated depreciation,
when considered in relation to the basic financial statements, presents fairly
in all material respects the information set forth therein.
/s/ Deloitte & Touche, L.L.P.
March 19, 1997
New York, New York
35
<PAGE>
CONCORD MILESTONE PLUS, L.P.
(a Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1996 and 1995
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
----------- ------------
<S> <C> <C>
Property, at cost (Notes 2,4 and 6)
Building and improvements $15,359,462 $15,262,476
Less: accumulated depreciation 4,829,534 4,253,132
----------- -----------
Building and improvements, net 10,529,928 11,009,344
Land 10,987,034 10,987,034
---------- ----------
Total property 21,516,962 21,996,378
Cash and cash equivalents (Note 2) 326,120 218,872
Accounts receivable 200,975 168,344
Prepaid expenses 22,864 32,690
Due from affiliates, net (Note 5) 0 47,879
Other assets, net 19,854 73,454
----------- -----------
Total assets $22,086,775 $22,537,617
========== ==========
Liabilities:
Bonds payable, net (Notes 2 and 6) 16,473,060 16,425,967
Accrued interest 137,100 130,246
Accrued expenses and other liabilities (Note 7) 255,137 337,268
Accrued expenses payable to affiliates, net (Note 5) 11,985 0
---------- ----------
Total liabilities 16,877,282 16,893,481
---------- ----------
Commitments and Contingencies (Note 11)
Partners' capital (Notes 1 and 3)
General partner (70,470) (66,124)
Limited partners:
Class A Interests, 1,518,800 5,279,963 5,710,260
Class B Interests, 2,111,072 0 0
----------- ------------
Total partners' capital 5,209,493 5,644,136
----------- ------------
Total liabilities and partners' capital $22,086,775 $22,537,617
========== ==========
</TABLE>
See Accompanying Notes to Financial Statements
36
<PAGE>
CONCORD MILESTONE PLUS, L.P.
(a Limited Partnership)
STATEMENTS OF REVENUES AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Rent (Note 4) $2,583,614 $2,573,507 $2,556,754
Reimbursed expenses 405,443 455,546 581,112
Interest and other income 20,606 32,226 18,791
---------- ---------- ----------
Total revenues 3,009,663 3,061,279 3,156,657
--------- --------- ---------
Expenses:
Interest expense (Note 6) 1,569,795 1,525,238 1,484,108
Depreciation and amortization (Note 2) 638,685 657,210 693,985
Management and property expenses 802,971 903,686 950,091
Administrative and management fees to
related party (Note 5) 132,007 141,359 159,274
Professional fees and other expenses 104,324 141,596 100,342
Write-down of property (Notes 2 and 4) 0 0 1,085,932
---------- ---------- ----------
Total expenses 3,247,782 3,369,089 4,473,732
---------- ---------- ----------
Net loss $(238,119) $(307,810) $(1,317,075)
======== ======== ==========
Loss per weighted average
Limited partnership 100 Class A
Interests outstanding $ (15.68) $ (20.27) $ (86.72)
========= ========= ===========
Number of limited partnership 100 Class A
Interests outstanding 15,188 15,188 15,188
========= ========= ==========
</TABLE>
See Accompanying Notes to Financial Statements
37
<PAGE>
CONCORD MILESTONE PLUS, L.P.
(a Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
General Class A Class B
Total Partner Interests Interests
---------- ------- ---------- -------------
<S> <C> <C> <C> <C>
PARTNERS' CAPITAL (DEFICIT)
December 31, 1993 $7,668,734 $(45,878) $7,714,612 $0
Distributions (200,006) (2,000) (198,006) 0
Net Loss (1,317,075) (13,171) (1,303,904) 0
---------- ------- ---------- -------------
PARTNERS' CAPITAL (DEFICIT)
December 31, 1994 6,151,653 (61,049) 6,212,702 0
Distributions (199,707) (1,997) (197,710) 0
Net Loss (307,810) (3,078) (304,732) 0
---------- -------- ---------- -------------
PARTNERS' CAPITAL (DEFICIT)
December 31, 1995 5,644,136 (66,124) 5,710,260 0
Distributions (196,524) (1,965) (194,559) 0
Net Loss (238,119) (2,381) (235,738) 0
---------- -------- ---------- ------------
PARTNERS' CAPITAL (DEFICIT)
December 31, 1996 $5,209,493 $(70,470) $5,279,963 $ 0
========= ======= ========= ============
</TABLE>
See Accompanying Notes to Financial Statements
38
<PAGE>
CONCORD MILESTONE PLUS, L.P.
(a Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(238,119) $(307,810) $(1,317,075)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Write-down of property 0 0 1,085,932
Depreciation and amortization 638,685 657,210 693,985
Insurance proceeds - net 0 0 88,585
Change in operating assets and liabilities - net:
(Increase) decrease in accounts receivable (32,631) 55,714 (59,221)
Decrease in prepaid expenses 9,826 39,145 60,946
Decrease (increase) in due from affiliate, net 47,879 (47,879) 0
Decrease (increase) in other assets, net 38,408 (60,375) (1,804)
Increase in accrued interest 6,854 3,428 3,428
Decrease in accrued expenses and other liabilities (82,131) (15,995) (95,302)
Increase (decrease) in accrued expenses payable to affiliates 11,985 (38,827) 22,231
---------- ---------- ----------
Net cash provided by operating activities 400,756 284,611 481,705
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITY:
Property improvements (96,984) (210,052) (74,959)
------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITY:
Cash distributions to partners (196,524) (199,707) (200,006)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 107,248 (125,148) 206,740
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 218,872 344,020 137,280
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 326,120 $ 218,872 $ 344,020
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $1,562,941 $1,521,810 $1,480,680
========= ========= =========
</TABLE>
See Accompanying Notes to Financial Statements
39
<PAGE>
CONCORD MILESTONE PLUS, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
1. Organization and Capitalization
Concord Milestone Plus, L.P., a Delaware limited partnership (the
"Partnership"), was formed on December 12, 1986, to invest in existing
income-producing commercial and industrial real estate, such as shopping
centers, office buildings, free-standing commercial warehouses and distribution
centers. Currently, the Partnership owns and operates three shopping centers
(the "Properties"), one located in Searcy, Arkansas (the "Searcy Property"), one
located in Valencia, California (the "Valencia Property") and one located in
Green Valley, Arizona (the "Green Valley Property"). The Partnership began
operations on August 20, 1987.
The Partnership commenced a public offering on April 8, 1987 in order to fund
the Partnership's real property acquisitions. The Partnership terminated its
public offering on April 2, 1988 and was fully subscribed to with a total of
16,452 Bond Units (see Note 6) and 15,188 Equity Units issued. Each Bond Unit
consisted of $1,000 principal amount of the Partnership's Escalating Rate
Collateralized Mortgage Bonds due November 30, 1997 (the "Bonds") and 36 Class B
Interests ("Class B Interests"), each such interest representing an assignment
of one Class B Limited Partnership Interest held by CMP Benefit Corp., a
Delaware corporation (the "Assignor"), under the Amended and Restated Agreement
of Limited Partnership of the Partnership Agreement (the "Partnership
Agreement"). Each Equity Unit consisted of 100 Class A Interests ("Class A
Interests"), each interest representing an assignment of one Class A Limited
Partnership Interest held by the Assignor under the Partnership Agreement, and
100 Class B Interests. Capital contributions to the Partnership consisted of
$15,187,840 from the sale of the Equity Units and $592,272 from the sale of the
Class B Interests that comprised the Bond Units.
2. Summary of Significant Accounting Policies
Basis of Accounting, Fiscal Year
The Partnership's records are maintained on the accrual basis of accounting for
both financial and tax purposes. Its fiscal year is the calendar year.
40
<PAGE>
Cash and Cash Equivalents
The Partnership considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Base Rents
Base rents are recognized on a straight-line basis over the terms of the related
leases, including free rent, if any, and lease step ups.
Property
Property is carried at cost, and depreciated on a straight-line basis over the
estimated useful life of 31.5 years. Building improvements are carried at cost,
and depreciated on a straight-line basis using an estimate useful life of 5
years. Leasehold improvements are amortized on a straight-line method over the
remaining term of the lease.
For Federal income tax purposes, the Partnership depreciates a portion (30
percent attributable to tax-exempt investors) of property and improvements using
the straight-line basis over 40 years; the balance is depreciated over 31.5
years.
The Partnership's policy, which is in accordance with SFAS No. 121, "Accounting
for Impairment for Long-Lived Assets" (issued March 1995), is to annually assess
any impairment in value by making a comparison of the current and projected
operating cash flows of each of its properties, on an undiscounted basis, to the
carrying amount of such property. Such carrying amount would be adjusted, if
necessary, to reflect an impairment in the value of the asset. The Partnership
adopted SFAS No. 121 in 1995 and determined that an adjustment to the carrying
amount of its long lived assets was not necessary in 1996 and 1995.
Income Taxes
The Partnership makes no provision for income taxes since all income and losses
are allocated to the partners and holders of Class A Interests and Class B
Interests for inclusion in their respective tax returns. The tax bases of the
Partnership's assets are $2,699,056 higher than the amounts reported for
financial statement purposes at December 31, 1996, which is due to the
utilization of different estimated useful lives for the depreciation of property
for tax and financial reporting purposes and the write-down of property during
1993 and 1994 for financial reporting purposes. There is no difference between
the tax and book bases of the Partnership's liabilities. (see Note 4).
41
<PAGE>
Discount on Bonds Payable
The Partnership is amortizing the original issue discount on bonds payable using
the effective interest method over the term of the Bonds.
Use of Estimates in the Preparation of Financial Statements
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 Statements Presentation
Certain reclassifications were made to the accompanying 1994 and 1995 financial
statements to conform with the 1996 presentation.
3. Partnership Agreement
Pursuant to the terms of the Partnership Agreement the general partner of the
Partnership, CM Plus Corporation, a Delaware corporation (the "General Partner")
is liable for all general obligations of the Partnership to the extent not paid
by the Partnership.
Holders of Class A Interests and Class B Interests are not liable for expenses,
liabilities or obligations of the Partnership beyond the amount of their
contributed capital.
All distributable cash, capital proceeds, profit, gain or loss from Partnership
operations are generally allocated 1 percent to the General Partner and 99
percent to the holders of Class A Interests. The holders of Class B Interests
were specifically allocated certain organization and offering expenses to the
extent of their positive capital account balances, thus reducing their account
balance to zero. After the holders of Class A Interests have received the 12.5
percent Priority Return (as defined in the Partnership Agreement) all
distributable cash is allocated in a ratio of 85 percent to the holders of Class
B Interests, 5 percent to the holders of Class A Interests and 10 percent to the
General Partner.
Since the inception of the Partnership, all income and distributable cash with
respect to the Equity Units has been allocated to the holders of Class A
Interests because they have not received the 12.5 percent Priority Return.
Therefore, no income has been allocated to the holders of Class B Interests.
42
<PAGE>
4. Properties
On August 20, 1987, the Partnership purchased the Searcy Property, a shopping
center in Searcy, Arkansas from Concord Milestone Plus of Arkansas Limited
Partnership, an affiliated entity, for $4,050,000.
On January 22, 1988, the Partnership purchased the Valencia Property, a shopping
center in Valencia, California from Concord Milestone Plus of California Limited
Partnership, an affiliated entity, for $11,575,000.
On April 15, 1988, the Partnership purchased the Green Valley Property, a
shopping center in Green Valley, Arizona from Concord Milestone Plus of Arizona
Limited Partnership, an affiliated entity, for $9,687,000. During 1994,
management determined, based on the current market conditions and projected
future cash flows of the Green Valley Property, that the Property had
experienced a decline in the market value that was other than temporary and
recorded a $1,085,932 non-cash charge against earnings, to write-down the
Property.
Each Property was acquired using the proceeds from the sale of Equity Units and
Bond Units. The Partnership issued Bonds to the purchasers of the Bond Units for
approximately 65 percent of the respective Property's purchase price.
Concurrently under the Indenture governing the Bonds, the Partnership granted
United States Trust Company of New York, as trustee (the "Trustee") (or, in the
case of a deed of trust, to a deed of trust for the benefit of the Trustee), a
note together with a related first mortgage or deed of trust on each Property
(each, a "Bond Mortgage") in the principal amount up to 65% of the Partnership's
purchase price on that Property, for the benefit of the holders of the Bonds
(See Note 6).
Additionally, as part of the acquisitions of the Properties, the underlying
tenant leases were assigned and assumed by the Partnership. Minimum base rental
income under non-cancelable tenant lease agreements, having lease terms expiring
from one to nine years, at December 31, 1996 are as follows:
Year Ended
December Amount
- ---------- ------
1997 $2,475,503
1998 2,105,756
1999 1,637,280
2000 1,297,406
2001 1,092,707
Thereafter 3,362,740
----------
Total $11,971,392
==========
43
<PAGE>
The above table does not include contingent rental amounts. The total contingent
rentals received in 1996, 1995, and 1994 was $188,716, $185,117, and $166,917,
respectively. A majority of the leases contain provisions for additional rent
calculated as a specified percentage of the tenant's gross receipts above fixed
minimum amounts and for reimbursement of all or a portion of the tenant's pro
rata share of real estate taxes, insurance and common area maintenance expenses.
There was no tenant in 1996 whose rents exceed 10% of the Partnership's total
revenues.
J.C. Penney, a clothing and apparel department store, occupies 39,396 square
feet or 50.2% of the gross leasable area of the Searcy Property. J.C. Penney's
annual minimum rent is $206,500 ($5.21 per square foot) and the lease provides
for annual percentage rent equal to 1.5% of gross receipts in excess of
$11,820,004. In addition, J.C. Penney is required to reimburse the Partnership
for real estate taxes, insurance and common area maintenance expenses.
Lucky Stores, Inc., a full service grocery store, occupies 31,842 square feet or
30.8% of the gross leasable area of the Valencia Property. Lucky Stores annual
minimum rent is $300,000 per year ($9.42 per square foot) and the lease provides
for percentage rent equal to 1.25% of gross receipts in excess of $38,000,000,
less amounts paid by Lucky Stores for property taxes and insurance premiums.
Lucky Stores is required to reimburse the Partnership for its pro rata share of
real estate taxes, insurance and common area maintenance expenses.
5. Related Party Transactions
The Partnership pays fees for customary property management services
("Management Fees") equal to a percentage of gross revenues from the Properties,
not to exceed 5 percent. The Management Fees are 3 percent for the Searcy
Property, 4 percent for the Valencia Property and 5 percent for the Green Valley
Property. Management Fees incurred for the years ended December 31, 1996, 1995
and 1994 were $107,007, $116,359 and $134,274, respectively. Management Fees are
payable to Milestone Property Management, Inc., a Delaware corporation and
affiliate of the General Partner ("MPMI").
The Partnership also pays fees to MPMI for administrative services provided to
the Partnership. These fees amounted to $25,000 each for the years ended
December 31, 1996, 1995 and 1994.
In 1996, the Partnership accrued $12,346 payable to Milestone Properties
("MPI"), an affiliate of the General Partner, as reimbursement for property
insurance expense for 1997.
In 1995, the Partnership accrued a $42,678 receivable from Concord Assets Group,
Inc. ("CAG"), an affiliate of the General Partner, due to an overpayment made to
CAG for insurance expense.
44
<PAGE>
In 1994 the Partnership accrued $20,953, payable to CAG, as reimbursement for
the actual cost of employee health insurance for the years ended December 31,
1992 and 1993.
6. Bonds Payable
Bonds payable consists of Bonds outstanding in the principal amount of
$16,452,000. The Bonds bear interest, payable semi-annually, from the date of
issuance at annual rates increasing from 8.15 percent to 10 percent (10 percent,
9.50 percent and 9.25 percent at December 31, 1996, 1995 and 1994, respectively)
and mature on November 30, 1997.
The Bonds have an effective interest rate of 9.66 percent. The Bonds are cross
collateralized by all three properties. Pursuant to the Indenture, the Bonds are
subject to early redemption (at 101 percent of the principal amount through May
31, 1997, and thereafter without any premium) under certain circumstances. The
holders of the Bonds have a first lien on the Properties through the Bond
Mortgages held by the Trustee (see Note 4).
The Bonds mature on November 30, 1997, at which time the outstanding
principal balance of $16,452,000 will be due. The Partnership has not yet
obtained any commitments for a refinancing and has not entered into any
agreements to sell any of the properties.
The Partnership is currently seeking to refinance the Properties and
Tristone Mortgage Company ("Tristone"), an affiliate of the General Partner, is
assisting the Partnership without compensation, in obtaining suitable
refinancing. In the event that a refinancing sufficient to satisfy the Bonds
appears unlikely, the General Partner will attempt to sell one or more of the
Properties. The General Partner believes that the Partnership will be able to
obtain adequate proceeds from a refinancing or sale of the Properties, or a
combination of the two, to enable the Partnership to satisfy the Bonds on or
prior to their maturity. Nevertheless, there can be no assurance that the
Partnership will be able to raise sufficient proceeds through a refinancing or
sale prior to the Bond maturity date, or that the terms of any such refinancing
or sale will be attractive to the partnership. In the event that the Partnership
is unable to raise adequate funds to satisfy the Bonds at maturity, there is a
risk of foreclosure under the Bond Mortgages.
45
<PAGE>
7. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities are comprised of the following:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
Accounts payable - trade $10,134 $90,769
Accrued real estate tax 72,236 71,344
Accrued leasing fees 0 20,000
Deposits - tenant security 77,582 79,196
Deferred income 78,666 71,348
Other 16,519 4,611
-------- --------
Total $255,137 $337,268
======== ========
</TABLE>
8. Fair Value of Financial Instruments
The estimated fair value of cash and cash equivalents, accounts receivable,
accounts payable, and accrued expenses approximate amounts reflected in the
balance sheet based on their short term nature. The carrying value and the fair
value of the bonds payable was not considered to be significantly different due
to the maturity date of the Bonds. The fair value estimates are based on
information available as of December 31, 1996. Although management is not aware
of any factors that would significantly affect the estimate of fair value
amounts, a comprehensive reevaluation has not been performed for purposes of
this financial statement disclosure and current estimate of fair value may
differ significantly from these amounts reflected in the balance sheet.
9. Commitments and Contingencies
Under various Federal, State and local laws and ordinances and regulations, an
owner, operator or developer of real property may be held liable for the costs
of removal or remediation of certain hazardous or toxic substances (including
asbestos containing materials) on or in such property. Such laws, ordinances and
regulations often impose liability without regard to whether the owner knew of,
or was responsible for, the presence of hazardous or toxic substances. The cost
of any required remediation of any property and the owner's, operator's or
developer's liability therefor is generally not limited under such laws,
ordinances and regulations, and could exceed the value of the property and/or
the aggregate assets of the owner, operator or developer. While none of the
Properties is presently subject to any environmental actions, the presence of
such substances, or the failure to properly remediate such substances, may
adversely affect the ability to sell or rent the Properties or to borrow using
any of the Properties as collateral.
46
<PAGE>
10. Subsequent Event
On February 15, 1997 the Partnership made a cash distribution of $3.42 per 100
Class A Interests which represented distributable cash for the quarter ended
December 31, 1996.
47
<PAGE>
CONCORD MILESTONE PLUS, L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Costs
Capitalized
Subsequent Gross Amount at
Initial Cost to Partnership to Acquisition which Carried at Close
of Period (A)
------------------------------------- -------------- ----------------------------------
Land
Building & Building & Building &
Description and Location Encumbrances Land Improvements Improvements Land Improvements Total
- --------------------------- ------------ --------- ------------ ------------ -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Town & Country Plaza $ 2,632,500 430,000 3,620,000 371,194 430,000 3,991,194 4,421,194
Searcy, AR
Old Orchard Shopping Center 7,523,500 6,500,000 5,075,000 1,287,632 6,500,000 6,362,632 12,862,632
Valencia, CA
Green Valley Mall 6,296,000 5,100,000 4,587,000 1,461,602 4,057,034 5,005,636 9,062,670
------------ --------- ---------- --------- ---------- ---------- ----------
Green Valley, AZ
$ 16,452,000 12,030,000 13,282,000 3,120,428 10,987,034 15,359,462 26,346,496
========== ========== ========== ========= ========== ========== ==========
<CAPTION>
Accumulated Date of Date Depreciation
Description and Location Depreciation(B) Construction Acquired Life
- --------------------------- --------------- ------------ -------- --------------
<S> <C> <C> <C> <C>
Town & Country Plaza 1,193,446 1985 08/20/87 31.5 years
Searcy, AR
Old Orchard Shopping Center 1,826,434 1965 01/22/88 31.5 years
Valencia, CA
Green Valley Mall 1,809,654 1960 04/15/88 31.5 years
----------
Green Valley, AZ
4,829,534
=========
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(A) Reconciliation of investment properties owned:
Beginning balance $ 26,249,510 26,039,458 27,050,431 27,787,658 27,761,885
Property acquisitions/improvements 96,986 210,052 74,959 262,773 25,773
Write-down of property 0 0 (1,085,932) (1,000,000) 0
---------- ---------- ---------- ---------- ----------
Balance at end of period $ 26,346,496 26,249,510 26,039,458 27,050,431 27,787,658
============ ============ ============ ========== ==========
(B) Reconciliation of accumulated depreciation:
Beginning balance $ 4,253,132 3,695,110 3,122,666 2,570,521 2,020,654
Depreciation expense 576,402 558,022 572,444 552,145 549,867
------------ ------------ ---------- ---------- ----------
Balance at end of period $ 4,829,534 4,253,132 3,695,110 3,122,666 2,570,521
============ ============ ========== ========== ==========
</TABLE>
48
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 326,120
<SECURITIES> 0
<RECEIVABLES> 200,975
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 26,346,496
<DEPRECIATION> 4,829,534
<TOTAL-ASSETS> 22,086,775
<CURRENT-LIABILITIES> 0
<BONDS> 16,473,060
0
0
<COMMON> 0
<OTHER-SE> 5,209,493
<TOTAL-LIABILITY-AND-EQUITY> 22,086,775
<SALES> 0
<TOTAL-REVENUES> 3,009,663
<CGS> 0
<TOTAL-COSTS> 1,677,987
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,569,795
<INCOME-PRETAX> (238,119)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (238,119)
<EPS-PRIMARY> (15.68)<F1>
<EPS-DILUTED> 0
<FN>
<F1>Loss per weighted average limited Partnership 100 Class A interests
outstanding
</FN>
</TABLE>
