SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - -----
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-16717
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OUTLET CENTRE PARTNERS
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(Exact name of registrant as specified in its charter)
Illinois 36-3498737
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Balcor Plaza
4849 Golf Road, Skokie, Illinois 60077-9894
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 677-2900
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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
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OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
BALANCE SHEETS
September 30, 1994 and December 31, 1993
(Unaudited)
ASSETS
1994 1993
-------------- ---------------
Cash and cash equivalents $ 1,356,151 $ 1,308,812
Accounts and accrued interest receivable 57,037 118,110
Escrow deposits 918,124
Deferred expenses, net of accumulated
amortization of $20,781 in 1994 and
$476,668 in 1993 394,844 43,332
-------------- ---------------
2,726,156 1,470,254
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Investment in real estate at cost:
Land 2,871,183 2,871,183
Buildings and improvements 27,303,361 27,037,691
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30,174,544 29,908,874
Less accumulated depreciation 8,865,568 7,945,254
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Investment in real estate, net of
accumulated depreciation 21,308,976 21,963,620
-------------- ---------------
$ 24,035,132 $ 23,433,874
============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 156,141 $ 347,663
Due to affiliates 66,178 35,255
Accrued real estate taxes payable 538,533 719,102
Security deposits 48,359 65,327
Mortgage note payable 12,721,614 11,543,885
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Total liabilities 13,530,825 12,711,232
Partners' capital (30,000 Limited Partnership
Interests issued and outstanding) 10,504,307 10,722,642
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$ 24,035,132 $ 23,433,874
============== ===============
The accompanying notes are an integral part of the financial statements.
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
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Income:
Rental $ 2,316,193 $ 2,095,604
Service 1,723,694 1,460,599
Interest on short-term investments 36,428 26,389
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Total income 4,076,315 3,582,592
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Expenses:
Interest on mortgage note payable 901,022 840,438
Depreciation 920,314 884,600
Amortization 64,113 55,715
Property operating 1,454,558 1,501,672
Real estate taxes 538,533 559,680
Property management fees 181,992 164,046
Administrative 234,118 150,023
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Total expenses 4,294,650 4,156,174
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Net loss $ (218,335) $ (573,582)
============== ==============
Net loss allocated to General Partners $ (2,183) $ (5,736)
============== ==============
Net loss allocated to Limited Partners $ (216,152) $ (567,846)
============== ==============
Net loss per Limited Partnership
Interest (30,000 issued and outstanding) $ (7.20) $ (18.93)
============== ==============
Distributions to Limited Partners None $ 663,000
============== ==============
Distributions per Limited Partnership
Interest None $ 22.10
============== ==============
The accompanying notes are an integral part of the financial statements.
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended September 30, 1994 and 1993
(Unaudited)
1994 1993
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Income:
Rental $ 767,113 $ 768,214
Service 510,740 516,076
Interest on short-term investments 13,688 5,222
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Total income 1,291,541 1,289,512
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Expenses:
Interest on mortgage note payable 322,975 281,665
Depreciation 306,771 304,984
Amortization 20,781 18,572
Property operating 494,436 416,742
Real estate taxes 178,981 186,559
Property management fees 56,021 58,961
Administrative 54,650 60,427
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Total expenses 1,434,615 1,327,910
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Net loss $ (143,074) $ (38,398)
============== ==============
Net loss allocated to General Partners $ (1,430) $ (384)
============== ==============
Net loss allocated to Limited Partners $ (141,644) $ (38,014)
============== ==============
Net loss per Limited Partnership
Interest (30,000 issued and outstanding) $ (4.72) $ (1.27)
============== ==============
Distribution to Limited Partners None $ 165,750
============== ==============
Distribution per Limited Partnership Interest None $ 5.525
============== ==============
The accompanying notes are an integral part of the financial statements.
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 1994 and 1993
(Unaudited)
1994 1993
-------------- --------------
Operating activities:
Net loss $ (218,335) $ (573,582)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation of property 920,314 884,600
Amortization of deferred expenses 64,113 55,715
Net change in:
Accounts and accrued interest
receivable 61,073 42,975
Escrow deposits (14,949)
Accounts payable (191,522) (189,712)
Due to affiliates 30,923 8,781
Accrued real estate taxes (180,569) (186,560)
Security deposits (16,968) (2,971)
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Net cash provided by operating activities 454,080 39,246
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Investing activity:
Improvements to property (265,670) (364,688)
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Net cash used in investing activity (265,670) (364,688)
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Financing activities:
Distributions to Limited Partners (663,000)
Proceeds from refinancing of
mortgage note payable 12,750,000
Repayment of mortgage note payable (11,468,631)
Principal payments on mortgage note payable (103,640) (99,162)
Funding of capital improvement escrows (903,175)
Payment of deferred expenses (415,625)
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Net cash used in financing activities (141,071) (762,162)
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Net change in cash and cash equivalents 47,339 (1,087,604)
Cash and cash equivalents at beginning
of year 1,308,812 1,815,751
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Cash and cash equivalents at end of period $ 1,356,151 $ 728,147
============== ==============
The accompanying notes are an integral part of the financial statements.
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policy:
In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the nine months and quarter
ended September 30, 1994, and all such adjustments are of a normal and
recurring nature.
2. Interest Expense:
During the nine months ended September 30, 1994 and 1993, the Partnership
incurred and paid interest expense on the mortgage note payable of $901,022 and
$840,438, respectively.
3. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
nine months and quarter ended September 30, 1994 are:
Paid
--------------------
Nine Months Quarter Payable
----------- -------- ---------
Property management fees $185,572 $61,786 $20,219
Reimbursement of expenses to
the General Partner, at cost:
Accounting 24,876 13,661 9,625
Data processing 5,960 3,096 7,136
Investor communications 15,156 8,323 7,449
Legal 4,961 2,724 2,890
Portfolio management 20,530 11,274 8,270
Other 29,423 16,157 10,589
4. Loan Refinancing:
In June 1994, the Partnership completed the refinancing of the Factory Outlet
Centre's first mortgage loan which was to mature in August 1994. The principal
balance on the prior loan was $11,468,631 and bore interest at a rate of 9.75%.
The terms of the new loan provide for a $12,750,000 mortgage balance with a
10.14% interest rate, monthly principal and interest payments of $117,120 based
on a 25-year amortization schedule, and a maturity date of July 1999. Fees of
approximately $416,000 were paid in connection with the refinancing. In
addition, the lender required funds to be deposited into real estate tax,
insurance and capital improvement escrow accounts.
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Outlet Centre Partners (the "Partnership") was formed in 1987 and owns and
operates the Factory Outlet Centre (the "Centre") located in Bristol,
Wisconsin. The Partnership raised $30,000,000 through the sale of Limited
Partnership Interests and utilized these proceeds to acquire the Centre.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1993 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The Centre's operations have stabilized and begun to improve due to renovations
and leasing efforts undertaken in 1993. As a result, the net loss decreased
during the nine months ended September 30, 1994 as compared to the same period
in 1993. An increase in advertising costs and higher interest expense on the
refinanced mortgage loan payable resulted in an increase in the net loss during
the quarter ended September 30, 1994 as compared to the same period in 1993.
Further discussion of the Partnership's operations is summarized below.
1994 Compared to 1993
- - ---------------------
The Partnership receives rents from certain tenants based on a percentage of
their gross sales in excess of stipulated minimums. Rising sales for many
tenants at the Centre and successful leasing efforts undertaken in early 1993
have caused an increase in percentage and base rent collections, resulting in
an increase in rental income during the nine months ended September 30, 1994 as
compared to the same period in 1993.
The Partnership bills tenants on a monthly basis for common area maintenance,
real estate taxes, advertising costs and other operating expenses of the Centre
based on estimates. Adjustments are periodically made to these billings once
the Partnership has determined the actual amounts due. The billings during 1994
also reflect additional income from the reimbursement of property management
fees, which are now billable to tenants under the terms of new leases. The
periodic adjustment of billings, combined with the increase in the amount
billable to tenants in 1994, have resulted in an increase in service income
during the nine months ended September 30, 1994 as compared to the same period
in 1993.
An increase in the principal balance and interest rate on the Centre's mortgage
loan due to the June 1994 refinancing caused an increase in interest on
mortgage note payable during the nine months and quarter ended September 30,
1994 as compared to the same periods in 1993.
Higher advertising expenses related to the Centre's media and marketing
campaign resulted in an increase in property operating expenses during the
quarter ended September 30, 1994 as compared to the same period in 1993.
As a result of the increased rental and service income described above,
property management fees increased during the nine months ended September 30,
1994 as compared to the same period in 1993.
Higher portfolio management, legal and accounting fees related primarily to the
refinancing of the Centre's mortgage loan have caused an increase in
administrative expenses during the nine months ended September 30, 1994 as
compared to the same period in 1993.
Liquidity and Capital Resources
- - -------------------------------
The cash flow provided by the Partnership's operating activities reflects
operations of the Centre plus interest income generated by short-term
investments, offset by administrative expenses of the Partnership. This cash
flow was partially used in investing and financing activities for improvements
at the Centre and principal payments on the mortgage note payable,
respectively. In addition, financing activities of the Partnership reflect the
net proceeds from the Centre's mortgage loan refinancing, which were used to
fund capital improvement escrows and financing fees. As a result, the cash or
near cash position of the Partnership increased slightly as of September 30,
1994 when compared to December 31, 1993.
The costs incurred in connection with the programs and strategies for the
Centre described herein have been funded with cash flow as well as the cash
reserves of the Partnership. Based upon the decline in the Partnership's cash
reserves and in anticipation of working capital deemed necessary for
refinancing the Centre's mortgage note payable, the General Partner suspended
distributions to Limited Partners beginning with the fourth quarter 1993
distribution.
In June 1994, the Partnership completed the refinancing of the Centre's first
mortgage loan. The principal balance on the prior loan was $11,468,631 and bore
interest at a rate of 9.75%. The terms of the new loan provide for a
$12,750,000 mortgage balance with a 10.14% interest rate, monthly principal and
interest payments of $117,120 based on a 25-year amortization schedule, and a
maturity date of July 1999. Fees of approximately $416,000 were paid in
connection with the refinancing. In addition, the lender required funds to be
deposited into real estate tax, insurance and capital improvement escrow
accounts.
The August 1991 opening of the 2.4 million square foot Gurnee Mills outlet
center in Gurnee, Illinois, resulted in additional competition for the Centre.
However, upon completion of the Centre's major renovation in late 1992, gross
sales at the Centre have generally stabilized and begun to rise. In addition,
during the second half of 1992 and throughout 1993, the Centre experienced a
high rate of lease expirations. Through successful leasing strategies and
efforts, many tenant leases were renewed, and several new tenant leases were
signed. These leasing strategies and efforts have continued into 1994 as
additional tenant leases have been expiring. As a result, the Centre has
maintained an average occupancy level of 90 percent. The Partnership has also
continued its media and marketing campaign. In addition, continued repairs and
upgrades are required in order for the Centre to remain attractive to tenants
and shoppers. The success of this media campaign and the leasing and repair
programs will impact the level of future cash flow generated by the Centre and
the Partnership's ability to resume distributions to Limited Partners, as well
as the future sale price which may be obtained by the Partnership.
A 400,000 square foot outlet mall is being constructed in Huntley, Illinois,
which is approximately 50 miles southwest of the Centre. Approximately 192,000
square feet has recently been completed and was opened to shoppers in August
1994. The remainder is expected to be completed in two phases by 1996. The
General Partner currently believes that this mall is unlikely to have a
significant impact on the operations at the Centre based upon its location
relative to the Centre.
On November 4, 1994, The Balcor Company completed the sale of the assets of
Allegiance Realty Group, Inc. to an unaffiliated company, Insignia Allegiance
Management, Inc. ("Insignia"), which is based in Greenville, South Carolina. As
a result of this transaction, Insignia has assumed the management of the
Partnership's properties. This transaction is not expected to result in any
material change to the property management fees paid by the Partnership.
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.
OUTLET CENTRE PARTNERS
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement previously filed as Exhibit No. 4.1 to
Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated
April 2, 1987 (Registration No. 33-13097) and Form of Confirmation regarding
Interests in the Partnership set forth as Exhibit 4.2 to the Registrant's
Report on Form 10-Q for the quarter ended June 30, 1992 (Commission File No.
0-16717) are incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the nine month period ending
<PAGE>
September 30, 1994 is attached hereto.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter
ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OUTLET CENTRE PARTNERS
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Partners-XXII, the General Partner
By: /s/Allan Wood
------------------------------
Allan Wood
Executive Vice President, and Chief
Accounting and Financial Officer (Principal
Accounting and Financial Officer) of Balcor
Partners-XXII, the General Partner
Date: November 11, 1994
---------------------------
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